Protectionist Practices as a Method of Restoring the Trade Balance

Abstract

Objective: This paper is an attempt to examine protectionist practices, illustrated using the example of the United States, as a means of establishing equilibrium in the trade and current account balance, especially under competitive conditions in pursuit of economic and world leadership.

Research Design & Methods: The research offers conclusions based on an analysis of the literature on the effectiveness of protectionist practices in economic relationships between countries, status presentation of reasons leading to imbalance deepening in trade and account balance. It also describes the results of a simulation on the implementation of punitive tariffs (by both parties) achieved using numerical models.

Findings: Protectionist practices are ineffective instruments for handling trade deficits. Moreover, they undermine international trade principles, lead to conflicts between the countries, and instigate symmetric retaliatory actions.

Implications/Recommendations: Apart from the overall ineffectiveness of protectionist practices in terms of optimising the trade and current account balance, there are adverse implications which may be beneficial to certain domestic groups of stakeholders while, on the international level, protectionist practices signify an attempt to weaken the position of other competitors in pursuit of world leadership.

Contribution: The paper shows that protectionist practices pursued by countries are ineffective instruments for handling trade deficits. Their application restricts technology transfer, deflates the efficiency and effectiveness of an economy and reduces welfare. Building actual civilisational and economic supremacy requires economic development in the real economy and cannot be achieved by administrative means.