Published online in Wiley Online Library (wileyonlinelibrary.com)
© 2011 Wiley Periodicals, Inc. • DOI: 10.1002/tie.20410
The past three decades are generally regarded as a period of widespread liberalization and high
growth within the world economy. On a wide range of measures, this era has seen the rapid globalization of business and the lifting from poverty of a large number of the world’s poorest, particularly
within large emerging markets such as China and India. While the undoubted benefits of globalization are widely recognized for raising economic growth rates and engaging a much larger number of
nations in international business activity, globalization has always had its critics. The purpose of this
article is to explore the recent rise in protectionism—what has been termed “global protectionism”—
to examine how it differs from traditional forms of trade protectionism, and to offer some tentative
assessment of its determinants. © 2011 Wiley Periodicals, Inc.
feature artICLe
Introduction
T he past three decades are generally regarded as a period of widespread liberalization and high growth within the world economy. On a wide range of measures, this era has seen the rapid globalization of business
(Legrain, 2002; Wolf, 2004) and the lifting from poverty of
a large number of the world’s poorest, particularly within
large emerging markets such as China and India. While the
undoubted benefits of globalization are widely recognized
for raising economic growth rates and engaging a much
larger number of nations in international business activity,
globalization has always had its critics. In the past, this opposition was limited both in its breadth and effectiveness. Small
but vocal groups of opponents regularly targeted major
trade and economic summits expressing concerns over the
distributional and environmental impacts of globalization
as well as a more general rejection of capitalism (Doh &
Teegen, 2003; Graham, 2000).
While the global era continues to deliver high rates
of economic growth, particularly within emerging economies, we can discern a new and emerging set of concerns
with globalization, articulated not just by opposing groups,
but increasingly by national political and economic leaders. A number of well-known cases—the Dubai Ports
World case and opposition to the China National Offshore
Oil Corporation’s (CNOOC’s) attempted takeover of
Unocal in the United States, the creation and protection
of “national champions” in France, oil nationalization in
Venezuela, and Russia’s restrictions on foreign investment
in the energy sector—illustrate a new and more selective
attitude toward international business activity. At the same
time, a number of countries struggle to contain and adjust
to unprecedented levels of global migration (Hatton &
Williamson, 2006), as well as the fear of jobs being shifted
overseas (Drezner, 2004). While still at an early stage, this
apparent rise in protectionism does have some empirical
foundation. For example, Kalotay (2007) reports a rise
By
Peter Enderwick
  325
Understanding the Rise
of Global Protectionism
Correspondence to: Peter enderwick, auckland university of technology, Private Bag 92006, auckland, New Zealand, +64 9 917 9999 ext 5748 (phone), +64
9917 9999 9876 (fax), [email protected].
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thunderbird International Business review Vol. 53, No. 3 May/June 2011 DOI: 10.1002/tie
These discussions also make it clear that economic
nationalism does not preclude trade or international
business activities more generally. Economic nationalism should not be equated with autarky (Gilpin, 1987;
Mayall, 1990). Indeed, the experience of the past decade
or so has been that international economic engagement
can bring huge benefits to a nation. The emphasis on
national unity and power suggests that economic nationalists will embrace global exchange when this contributes
to the economic success of the individual nation-state
(Nakano, 2004). The work of Evans (1997), who finds a
greater role for government in small open economies,
and Katzenstein’s (1985) cases of small European nations
both highlight the ways in which government policies
can be used to provide the necessary social protection for
national unity in a competitive world economy. The more
recent experience of the Republic of Ireland, with its
tripartite corporatist bargaining approach to managing
economic growth, is a further example.
In the global era, we can see economic nationalism as a
reaction to a number of economic conditions. On the one
hand, the expansive processes of globalization can threaten
national identity and encourage a protective response. The
French view of the demeaning global impact of American
culture is a prime example. At the same time, policymakers
may foresee an opportunity to consolidate their economic
position by pandering to such sentiment. The creation of
national champions and the enhancement of economic
status is one manifestation of this type of response. A second
set of conditions may be found in resource-rich export nations who use current strong demand conditions to consolidate their hold over critical resources or their share of value
from resource industries. The recent policy proclamations
of Venezuela and Russia may be interpreted in this light.
Third, the post-9/11 emphasis on national security offers a
rationale for economic protectionism in what may be seen
as critical sectors or against investment from questionable
sources. The recent incidents with Dubai Ports World in
the United States and Dubai Aerospace Enterprises in New
Zealand illustrate this type of thinking. A fourth justification
may be found in the reaction to new global processes of expansion, including offshore sourcing. In a number of cases,
the initial reaction was a desire to preclude such activities, at
least within the public sector (National Association of State
Procurement Officials [NASPO], 2005).
from trade Protectionism to Global
Protectionism
Protectionism is far from new and has a long and
controversial history, particularly trade protectionism
since 2004 in the number of regulatory changes less favorable to foreign direct investment.
The purpose of this article is to explore the recent
rise in protectionism—what has been termed “global
protectionism” (Meunier, 1999)—to examine how it differs from traditional forms of trade protectionism, and to
offer some tentative assessment of its determinants. The
discussion is organized into five primary sections. Following this introduction, the second section discusses the
idea of economic nationalism, which underpins recent
protectionist sentiment. The third section contrasts the
old and new forms of protectionism and highlights the
defining features of the new or global protectionism. A
tentative discussion of the likely determinants of global
protection is offered in the fourth section. The last section contains concluding comments.
Economic Nationalism and
Protectionism
We can define economic nationalism as a set of policies
emphasizing domestic economic activities and unified
national interests. It is difficult to argue that there exists a coherent theory of economic nationalism; rather,
the concept has been associated with a particular set of
attitudes (Gilpin, 1987). Moreover, the form of such attitudes and associated policies has evolved over time. As
Helleiner (2002) recognizes, the absence of a coherent
policy program underpinning economic nationalism
means that its appeal is likely to persist, even in an era
of market liberalization and global economic activity.
Economic nationalism is quite distinct from ideologies of
Marxism or liberalism, which view the economy in class
terms—the former seemingly advantageous to labor, the
latter to capital. The concept of economic nationalism
builds on the broader concept of nationalism, the importance of national identity. Economic nationalism, with
its emphasis on economic security, focuses on the use of
economic policy instruments to increase national power
and unity.
Recent discussions anticipate a decline in the significance of economic nationalism as global economic activity and the increasing role of international agencies and
MNEs erode the economic power of individual nations
(Gellner, 1983; Hobsbawn, 1992). However, Greenfield
(2003) highlights the centrality of nationalism in promoting forms of social structure conducive to an effective
modern economy. This suggests the likelihood of rising
nationalism within emerging markets such as China,
India, and Russia as they move to industrialize or rebuild
their economic systems.
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costs resulting from the tariff. Of course, such a strategy
assumes that the manufacturer does not simply shift
sales to an alternative market.
Perhaps the most substantial justification of trade
protectionism is the infant industry one. The thinking
underpinning this argument is that for a country, particularly a developing country, to establish a new industry, it
may be necessary to shelter the emerging industry from
overseas competition in its fledgling years until it is strong
enough to survive on its own. Historically, this argument
was used by the United States as it sought to industrialize
in the face of British dominance of world trade and, more
recently, by both Japan and South Korea as they sought
to become global competitors. A variant of this case is the
“import surge” argument whereby an industry is provided
temporary relief to restructure and adjust to new competition. The US car industry in the late 1970s and early
1980s struggling to adjust to the rise of Japanese producers is perhaps the best-known recent example.
The focus of these arguments for protectionism is primarily trade-based. However, as suggested, as the nature
of the world economy has changed with the growth in
importance of foreign direct investment and the recent
rise in offshore sourcing, a broader set of arguments for
protection has emerged.
A useful way to understand the differences between
traditional and global protectionism is to contrast them,
as provided in Table 1.
(Corden, 1971). While the benefits of international
trade—increased specialization, exploitation of comparative advantage, and attainment of economies of
scale—are well understood, there is less agreement on
the appropriateness of trade restrictions. A number of
arguments in support of trade protectionism have been
made. One argument is that of sovereignty and the idea
that trade increases dependency on other nations. This
may trigger restrictions, particularly in what are considered strategically important industries such as defense
or airlines, or where cultural integrity is threatened.
For example, a number of countries place restrictions
on foreign ownership of their airlines or within various
media industries. A second antitrade argument focuses
on the fear that trade will drive standards to the lowest
level—the so-called “race to the bottom” argument. The
process at work here is the idea that production will be
attracted to the least-regulated and, hence, least-cost
locations. However, the fact that the full costs of production (environmental degradation, labor exploitation)
will be borne by the global community means that trade
restrictions may be called for. A third argument, and
one that highlights one particular form of trade restriction, the tariff, is the concept of optimal tariff theory.
This concept assumes that a government, by imposing a
tariff (a tax on imports), is able to capture some of the
manufacturer’s value share. In other words, overseas
manufacturers are assumed to (fully) absorb the higher
Characteristic traditional Protectionism Global Protectionism

table 1 a Comparison of traditional and Global Protectionism
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courier subsidiary EMS faces through its determination
of the range of weights and administrative qualification
standards that the four international competitors—
DHL, TNT, UPS, and FedEx—face (Knowledge@Wharton, 2007).
A key feature of global protectionism is the importance of financial protectionism and hostility toward acquisitions by foreign companies of businesses considered
to be of strategic value. In part, such opposition might be
attributed to the changing geography and forms of international capital. Financial power, traditionally the province of developed countries, is increasingly dispersed.
Oil-exporting nations and Asian economies with strong
trade surpluses are now major sources of global capital.
Furthermore, these investors reflect a growing diversity,
as sovereign wealth funds, government-investment companies, state-owned enterprises, and wealthy individuals
have become more prominent (Farrell & Lund, 2007).
These newer sources of capital have raised security concerns, as was apparent in the DP World and Lenovo cases
in the United States.
forms of Protection
The second contrast is in the form of protectionist instruments. While trade protectionism identifies with
the use of tariffs, quotas, and nontariff barriers, global
protectionism is associated with a much wider range of
measures, including subsidies, sanitary and phytosanitary
provisions, capital restrictions, state ownership, and even
industrial policy.
These measures impose a huge economic cost, not
just on consumers, but also on producers in developing
countries. Research by the International Food Policy
Research Institute suggests that protectionism and subsidies by industrialized nations cost developing countries
about US $24 billion annually in lost agriculture and
agricultural income, while trade-distorting measures also
displace more than US $40 billion of net agricultural
exports per year from developing countries. Subsidies
in particular industries are enormous. The US Farm Bill
passed in 2002 provided for $190 billion in assistance to
the US agricultural sector over the next decade. The vast
majority of this funding was allocated for subsidies to just
eight crops. Cotton farmers in the United States received
$3 billion in 2002, over $200 an acre. Europe gives nearly
$1 billion in subsidies to cotton farmers, mostly in Greece
and Spain. The World Trade Organization (WTO) has
ruled that US government subsidies to cotton farmers
undermine free trade. The costs of this distortion are
considerable. An estimated 20 million people in West
and Central Africa depend on cotton for their livelihood.
Scope of Protection
The first contrast is in terms of the scope of protection.
As indicated, the focus of traditional protectionism has
been on trade. Global protectionism, however, recognizes the broadening of international economic activity
that has been characteristic of globalization and shifts
beyond trade to also encompass foreign direct investment, offshore sourcing, and even migration. Indeed,
the perceived increase in protectionism in recent years
is strongly associated with nontrade interventions. Since
mid-2005, a number of EU member nations have moved
to prevent cross-border mergers and acquisitions, despite their commitment to a deepening of the single
market (Ahearn, 2006). French concern of a possible
takeover of Danone by Pepsi and of Arcelor by India’s
Mittal group triggered an initiative requiring the Caisse
des Depots et Consignations, a state-owned bank, to
increase its investment in French equities. At the same
time, there were proposals for incentives for companies
to boost employee shareholdings. The French Parliament approved an amendment to the EU takeover directive so as to introduce “poison pill” defenses, a device
that allows shareholders in firms threatened by a hostile
bid to buy new shares in their company at a big discount,
raising the costs of an acquisition (von Bredow, 2006).
Similar attempts to prevent cross-border takeovers occurred in Italy, Spain, and Poland. Even in Germany, the
government has faced opposition from the European
Commission over the “Volkswagen Law,” which protects
Volkswagen from hostile bids (Ahearn, 2006). It is interesting to note that the likely acquirer of Volkswagen will
be Porsche, a domestic company that would undoubtedly benefit from increased scale.
The rise of protectionism is not confined to the
European Union. New draft legislation in Russia has
restricted foreign companies’ access to Russia’s natural
resource wealth, particularly oil and gas, and has seen
foreign investors squeezed out of existing operations in
some cases. A more comprehensive strategy of nationalization has been initiated in the Venezuelan oil industry.
In the United States, a series of protectionist moves have
caused concern worldwide. These include the 2001 steel
tariff that contravened WTO obligations, opposition
to the attempted acquisition of Unocal by China-based
CNOOC and its subsequent takeover by Chevron, and
the considerable political opposition to DP World’s attempt to buy into port management businesses in six
major US seaports in 2006. Even China is not immune
to selective protectionism. A good example is the way in
which China Post is able to control the competition its
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China is under considerable pressure to balance its
external account, and this
necessitates a shift from the
export of goods to the export
of capital.
those surveyed approved of the government’s intervention against hostile bids by foreigners.
A defining feature of this form of industrial policy is
not simply its protection of the domestic market but the
belief that the state has both the right and the ability to
influence corporate strategy through the promotion of
national champions. Economies that are not internationally competitive fear the rapid growth of cross-border acquisitions while regional economic groupings such as the
European Union encourage the development of regional
strategies and structures. This trend is particularly evident
in three relatively unconsolidated sectors: telecoms, banking, and energy (von Bredow, 2006).
Similar signs are also apparent in China, where
restrictive new international takeover regulations have
made foreign investment much more difficult in a number of sectors. At the same time, the authorities continue
to promote domestic consolidation and the internationalization of leading enterprises (Boston Consulting
Group [BCG], 2007; Lynton, 2007). Indeed, China is
under considerable pressure to balance its external account, and this necessitates a shift from the export of
goods to the export of capital. The establishment of
the China Investment Corporation (CIC) with a capital
base of US $200 billion is one manifestation of this (DeWoskin, 2007). However, as suggested, such investment
bodies, which are foreign-owned, government-managed,
and essentially secretive, are viewed with suspicion in
many parts of the world.
Oxfam estimates abolishing US subsidies to the cotton
industry would lead to a 6 to 14% increase in the price
of cotton, with households in Africa’s cotton-producing
countries benefiting by 2.3 to 5.7% (Overseas Development Institute [ODI], 2004).
A preference for state ownership is evident in the oil
industry, where 80% of the world’s oil reserves are already
controlled by state-owned firms. In Russia and Venezuela
there have been recent attempts to confiscate resources
from foreign investors. In the case of Venezuela, where
the domestic oil industry is not technologically strong, it
appears that the political preference is for control over
revenue maximization.
Interventions to restrict foreign takeovers have occurred in a number of countries. As mentioned earlier,
examples from France, Spain, Italy, and Poland have
been well documented. Lesser-known cases have also occurred in Australia. In 2001, Australian Treasurer Peter
Costello rejected Royal Dutch Shell’s $10 billion takeover
bid for Woodside Petroleum, arguing that the takeover
was contrary to the national interest. More recently, an
international consortium bid for Qantas failed because
Australian law prevents foreign interests from owning
more than 49% of the airline, and no single shareholder
can own more than 25% of it. A major failing with such
a selective approach to capital restrictions is that it increases uncertainty and discourages inward investment.
Furthermore, when governments attempt to support
individual companies or industries, they must make these
strategic choices under uncertainty. In general, governments act on the basis of less information than is available
through market processes. It is likely that government
interventions will be inferior to market outcomes in the
majority of cases. It is only under conditions of market
failure that an economic rationale for such intervention
appears robust (Wruuck, 2006a).
Protectionism in the form of industry policy is most
evident in France. On August 31, 2005, France announced that it would protect 11 domestic industries
defined as strategic from buyouts by foreign companies.
The protected industries include defense, biotechnology, telecommunications, casinos, encryption, IT security, and antidote production. This was done primarily
to frustrate Italian energy group Enel’s bid for Suez, a
French concern. The French prime minister described
the measure as an example of economic patriotism.
Paris argued that its actions would comply with EU
economic laws, which allow each country to define
“strategic” sectors in accordance with national interests.
Such moves appear popular with voters. According to
a recent survey by TNS Sofres, more than two-thirds of
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In an era where national security has replaced national
defense as the key strategic
concern of governments, the
appeal of economic protectionism is all too apparent.
the key concerns are economic patriotism and national
security. While the processes of globalization and economic protectionism appear incompatible, there are
clear links between them. Globalization brings increased
specialization and the need for continuous adjustment
and adaptation. Such adjustment can be difficult, and
governments may be tempted to intervene to protect
industries, firms, and employees. Where governments
experience poor economic performance or a perception that conventional economic policy instruments are
of declining effectiveness in a global economy, they may
be tempted to resort to more extreme protectionist measures (Wruuck, 2006a). At the same time, in an era when
many domestic economic goals—employment, interest,
and exchange rates, for example—are increasingly determined in world markets, the pursuit of national economic prestige may become a priority. One of the striking
features of global protectionism is the way that a number
of national governments portray it in a positive light.
In an era where national security has replaced national defense as the key strategic concern of governments, the appeal of economic protectionism is all too
apparent. There is increasing suspicion of new, emerging
sources of international investment, particularly where
this departs from traditional sources of national competition or where the investment vehicles do not reflect
conventional forms. The well-publicized recent cases of
opposition to attempted or perceived takeovers involving
Danone, Unocal, Lenovo, and DP World all made reference to national security concerns.
A distinguishing feature of global protectionism is
that it appears equally attractive to economies that are
both weak and strong performers. The increased nationalization of resource-based industries such as oil in
countries such as Russia and Venezuela comes at a time
of record oil prices. Here the motive appears to be to capture a greater share of value (Venezuela) or to use energy
revenues to rebuild the broader economy (Russia).
locus and coverage of Protectionism
Traditionally, pressure for trade protection came from
adversely affected industries or firms. In a small number
of cases, particularly for professional workers, restrictions
on migration and occupational licensing have been used
to maintain income levels. In contrast, under global protectionism, pressure for protection arises from a wide variety of sources, including national leaders, industry bodies, employees, and consumers. The opposition to foreign
investment by political leaders is well documented in
a number of countries, including France, Spain, the
United States, Russia, and a number of Latin American
There are a number of well-documented dangers
with industrial policy–type interventions. One obvious
one is the likelihood that other countries will retaliate
with matching subsidies or reciprocal barriers. Furthermore, the selection of favored industries may be
subject to the influence of vested interest. There is also
the danger that governments will select highly visible
but competitively inappropriate projects. The Chinese
experience certainly suggests that government-sponsored champions face considerable challenges (Nolan
& Zhang, 2002; Zhang, 2004).
Source and Basis for Protectionism
Traditionally, protectionist measures have been associated with economic or competitive weakness. Typically,
this has provided the rationale for subsidies, tariffs, and
quotas. In a more dynamic context, the fostering of an
infant industry, assumed initially to be incapable of competing unassisted, reflects underlying weakness. The conventional arguments in support of trade protectionism
were based on adverse competitive effects, where it was
believed that overseas competitors enjoyed some form of
unfair competitive advantage or where trade represented
a threat to a nation’s defense capability. This has long
provided a justification for trade and investment restrictions in strategic industries such as armaments, airlines,
and the media.
With global protectionism, the source and basis for
protectionism has become much broader in scope. Here,
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The social crisis of regular riots and industrial conflict are
manifestations of this underlying contradiction.
Thirlwell (2007) argues that a more critical attitude
toward globalization is now apparent in a number of
countries, including the United States and much of Western Europe, and manifests itself as widespread disquiet
over offshore outsourcing, foreign investment in sensitive
industries, migration, and trade deficits. In part, much of
this opposition is the result of poor levels of understanding and debate over globalization. The benefits of globalization are shared unevenly, and few governments have
managed the process effectively, leading Stiglitz (2006)
to argue the need for strong redistributive policies to
increase globalization’s acceptance.
Geography and rationale for Protectionism
Table 1 suggests that the geographical scope has broadened under global protectionism. While much of the
trade protectionism was directed at other advanced
economies, or a select number of developing countries,
the focus is now global. As emerging economies such
as China, India, Mexico, and Brazil have spawned new
potential industry leaders—many of which are seeking to
globalize through acquisitions—they have raised concern
among the most developed economies.
There is considerable irony in the fact that the very
nations that have been most enthusiastic in driving
globalization—and who have benefited most from its
processes—are now at the forefront of embracing protectionism. Recent US trade deals, and with relatively minor
trading partners such as Peru and Panama, have included
labor standards enforceable by trade measures. Such
measures were long ago dismissed by the WTO. The continuing resistance of developed countries to the reform
of agricultural protectionism is a key factor frustrating
progress in the Doha round of multilateral trade talks. At
the same time, there is some disquiet, particularly within
the United States, at the growing influence of developing
countries within the politics of WTO trade negotiations
(Jacques, 2006).
The rationales for protectionism have also expanded
beyond infant industry arguments. In an increasingly
security-conscious world, a wide range of sectors has now
been defined as strategic (including, in France, casinos).
The criticality of energy, transport, and communication
infrastructure has seen new ownership restrictions imposed on these sectors. At the same time, the primacy
of economic success in the global era has encouraged
governments to commit resources to the creation of
national (and international) champions. In many cases,
it is argued that this cannot be achieved in the absence
countries. Within the European Union there has been a
marked shift in opposition to the single market, which in
the 1980s came from firms unlikely to survive open competition, while today the main opposition comes from
national governments and politicians concerned with
maintaining national prestige and jobs as a result of crossborder mergers. Industry bodies and adversely affected
employees were vocal in organizing protests against
Walmart’s joint venture partnership with Bharti Retail
in India, which many see as a back-door way into India’s
highly fragmented retail sector and which has stirred up
strong protectionist sentiment against large-scale retailing (Guruswamy, Sharma, Mohanty, & Korah, 2006).
Consumer concern lies behind the calls for restrictions
on Chinese imports of toys, foodstuffs, and medicines in
light of recent quality failures (Lipton & Story, 2007).
However, the coverage of protectionist policy appears less comprehensive under global protectionism.
As indicated earlier, in many cases the focus is single
firms or deals, and it is only after this that broader regulations defining strategic assets or industries are developed. Indeed, a key feature of global protectionism is
a selective approach to globalization and a tendency to
accept its best features while avoiding the worst (Issac,
2007). Its selectivity also creates an incoherent approach
with no clear underlying rationale for intervention.
Rather, individual deals become the target for opposition. Obviously, this brings benefits to a select few, but
uncertainty for a majority.
France represents perhaps the clearest example of
this duplicity with regard to globalization. French firms
such as Renault, Danone, Axa, Carrefour, Total, and a
number of luxury goods producers continue to build
their success in world markets. At the same time, there
is considerable opposition to inward investment, particularly acquisitions (Fenby, 2007). This duality is also apparent from the proposed reforms of Prime Minister Sarkozy,
who is intent on eliminating domestic structural barriers
to growth and improving France’s economic standing but
would qualify as a fervent nationalist. France’s distrust of
globalization has become apparent from the continuing
strength of the far right, the rejection of the European
Union Constitution in the 2005 referendum, and the
focus on cultivating “national champions.” This highly selective protectionist focus suggests the predominance of
pragmatism over ideology. It is unusual for an economy
to pursue modernization without extensive engagement
with the world economy. According to Sabatier (2006),
this policy ambiguity has planted the seeds of social discontent in France with a marked division between those
who benefit from globalization and those who do not.
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and by incorporating a number of trade-related issues
into negotiations. Trade in services, and the opportunities for offshore sourcing of tasks, has significantly
increased the number of workers exposed to international competition. These workers, many of them politically articulate, are increasingly ambivalent toward
open markets and unfettered trade. In addition, trade
negotiations now encompass a range of regulatory issues, including intellectual property, investment regulations, and environmental and labor provisions. The
net result is to complicate the negotiation of trade and
investment agreements and to increase the incentives
to opt out.
While these international factors would seem to be
pervasive influences on global protectionism, they affect
different countries to differing degrees, and since the domain for protectionism is still the nation-state, predicting
the impacts for specific countries is unclear. For example,
the United States is particularly concerned about national
security considerations, has the largest trade deficit with
China, and has a sufficiently high cost level to fear widespread job loss through offshore sourcing. Yet, at the
same time, the United States is one of the most powerful
and internationally competitive economies in the world
and displays considerable adaptability in responding to
changes in the global economy. The net effect of such
factors on the propensity to adopt a global protectionist
stance is not clear.
At the national level, we can identify three main
factors likely to influence the extent of protectionism.
The first would be the level of competitive strength (or
weakness) of an economy. We might expect competitive strength to be negatively related to the propensity
to adopt protectionist measures. The problem with such
a hypothesis is that global protectionism is highly selective; it does not apply to the entire economy. Again, we
can consider the case of the United States, which has actively intervened in areas of comparative weakness (steel,
paper) or political sensitivity (agriculture, infrastructure,
public-sector services) and yet which, in aggregate terms,
would be considered a robust economy. On the other
hand, the competitive weaknesses of the French economy
might provide a clearer explanation.
A second factor at the national level is the prevailing cost structure. All other things equal, a high-cost
economy, particularly where costs do not reflect productivity, may be more vulnerable to overseas competition,
disinvestment, and offshore sourcing and, hence, more
likely to adopt protectionist measures. Again, perhaps
the clearest example is France, which is struggling to
reform its high-cost economy while simultaneously reof protectionism. Such thinking transcends the simple
infant industry arguments, as it encompasses domestic
consolidation, research and development (R&D) support, and facilitation of entry into world markets.
the Determinants of Global
Protectionism
For many reasons, it would be extremely useful to understand the determinants of global protectionism. Such understanding would obviously be useful for policy purposes
and for risk assessment within international business
strategies. Unfortunately, while there have been attempts
to model the drivers of trade protection (Metcalfe &
Goodwin, 1999; O’Rourke & Sinnott, 2001), developing
a similar level of understanding of global protectionism
seems much more difficult.
The difficulty is primarily the result of two considerations: (1) ambiguity surrounding relationships with the
key determinants and (2) interpretive issues of aggregation and causation.
ambiguity Issues
We can consider the factors likely to encourage global
protectionism at three levels: the international economy, the national economy, and unique or historical
considerations.
At the international level, there have been a number of developments in the world economy, which have
nurtured global protectionism. The first would be the
rise of new competitors in world markets. The rapid
growth and trade success of emerging economies such
as China and India has created a fundamental change
in the structure of the world economy, with emerging
markets now accounting for half of world gross domestic product (GDP) (at purchasing power parity rates)
and over 40% of world exports. This success now underpins outward investment and cross-border acquisitions. The resultant pressures on balance of payments,
resource costs, and industry adjustment highlight the
apparent attractions of protectionist sentiment. A second key change has been in international relations,
particularly since September 11, 2001. Heightened
concern with national security has led to much closer
scrutiny of inward investment and a desire to safeguard
what are now seen as sensitive or critical industries and
resources (Marchick, 2007). The third global factor is
technology, and in particular advances in communications technologies. One significant impact has been to
alter the nature of trade by both increasing the range
of goods and services that can be effectively traded
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understanding the rise of Global Protectionism    333
DOI: 10.1002/tie thunderbird International Business review Vol. 53, No. 3 May/June 2011
It is likely that past
historical experiences or
distinct social and cultural
traits could affect the propensity to adopt protectionist measures.
Green Party. In the United States, the Democratic Party,
which has grown increasingly critical of trade, now controls the legislature.
The third set of factors at the country level is the
result of unique cultural and historical factors. It is
likely that past historical experiences or distinct social
and cultural traits could affect the propensity to adopt
protectionist measures. Russia represents one of the
most extreme cases. The massive upheaval following the
collapse of the Soviet Union, the piratization of Russian
natural resources, falling living standards, questionable
economic advice from the West, and an embarrassing
loss of international influence undoubtedly contributed
to Russia’s decision in the late 1990s to move away from
closer integration with the West. Putin has capitalized on
the rising nationalist response by reasserting the centrality of state ownership and national control of strategic
energy resources (Szakonyi, 2007).
In a similar vein, Meunier (1999) highlights the
unique social and political characteristics that make
France the world leader in supporting nationalism and
economic protectionism. These include France’s view
of itself as a world power, its latent anti-Americanism,
the centrality of the concept of sovereignty in French
political thinking, the importance of the state in economic affairs, and a strong desire to preserve French
culture and language. In combination, these factors
have made France a staunch critic of globalization and
of open markets.
sisting foreign acquisitions, in part because of a fear that
jobs could be lost as work is shifted to lower-cost locations in Asia or Eastern Europe. However, a more important consideration here may not be simply the level
of costs, but the ability to upgrade economic activity to
stay ahead of competitors. French and Italian clothing
manufacturers that have focused on quality and sophisticated design have prospered, despite the rise of China
to become the world’s leading supplier of clothing and
textile products.
A third country-level factor is the degree of foreign economic involvement in an economy. We might
hypothesize that the higher the level of such involvement, the greater the level of resentment and, hence,
desire for protectionist measures. This might be a
factor in explaining the French attitude. The stock
of inward investment is France was 44% of GDP in
2004 compared with 36% in Britain and just 22% in
Germany. One in seven French employees works for a
foreign-owned firm compared with one in ten in Britain (von Bredow, 2006). However, there are also cases
that do not seem to follow such thinking. Luxembourg
and the Republic of Ireland may be cases in point.
Both have foreign investment levels as a percentage
of GDP twice that of France and yet do not seek to
limit such transactions. It might be argued that this
is an inevitable outcome of small size, but such counterexamples still cast doubt on some of the expected
relationships. It might be more relevant to consider
the balance of inward and outward transactions. In
such a case, we might expect an imbalance, and particularly a higher level of imports, inward investment,
or inward migration, to be more closely related to the
desire for protectionism. Similarly, the type of foreign
investment may be relevant. In many nations, there is
greater resentment toward acquisitive FDI or toward
investment from particular locations. Both Australia
and New Zealand, for example, have always expressed
greater resentment toward Asian than American investment, even though the latter has always been much
higher (Enderwick, 1998).
A final factor at the national level is the political
structure of a country. More specifically, we might expect coalition governments to be more willing to adopt
protectionist policies in response to the demands of
some of their more extreme partners. This certainly
appears to be the case in India, where further liberalization is proving very difficult to achieve. Similarly, the
recent Labor government in New Zealand agreed to
fund an expensive Buy New Zealand Made campaign to
ensure the continuing support of the country’s minority
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334 fEaturE artIclE
thunderbird International Business review Vol. 53, No. 3 May/June 2011 DOI: 10.1002/tie
number of cases emphasizing individual firms and deals.
We have also touched on the difficulties of hypothesizing the determinants of global protectionism. There
appears to be considerable ambiguity surrounding the
likely determinants, as well as problems in interpreting
relationships. Further work will be required to clarify
these processes.
Our discussion does suggest a number of conclusions. The first is that the growth of global protectionism
appears as a gradual process; it is not possible to identify
a single causal factor or event (Ikenson, 2007). The diversity of motives for and forms of protectionism suggests
that we are observing a complex process.
Second, global protectionism displays a number of
novel features. One is the fact that it is driven largely by
the successes of globalization, and particularly the rise of
new competitors, as opposed to failures. The subsequent
adjustments in the world economy can only be postponed
by protectionist measures. A second feature is the primacy of concern within developed countries. While traditionally criticisms of the operation of the global economic
system have come from developing countries, the center
of global protectionism is the advanced industrialized
economies of North America and Western Europe, the
very architects of globalization.
Third, it is difficult to find any theoretical support
for global protectionism, and there are sound arguments
for resisting it (Issac, 2007). As we suggest, the roots of
modern global protectionism are found in economic nationalism, a set of attitudes that appear to predominantly
reflect anxiety. Indeed, a recent study finds no evidence
in support of economic patriotism (Wruuck, 2006b).
Fourth, considerably more work is required to help
us understand the subtleties of global protectionism. The
work of Issac (2007) contrasting the British experience
with Continental Europe offers some useful insights.
Finally, we might ask the question of whether the
continuation of globalization is under threat from global
protectionism. We would suggest that the answer is in
the negative. The benefits of globalization are increasingly understood and are enjoyed by a growing number
of economies and proportion of the world’s population.
Global protectionism fails to offer an effective critique
of processes that have brought some of the highest sustained economic growth rates the world has ever seen.
This is not to deny that governments could do better in
highlighting the advantages of globalization and in ensuring a more equitable distribution of such benefits. However, global protectionism does seem to be sufficiently
well entrenched to justify our efforts to gain a better
understanding of this important phenomenon.
This discussion identifies a number of factors that
might be valuable in explaining the adoption of global
protectionist policies. However, it does highlight the
considerable ambiguity associated with the most plausible
explanatory factors. Furthermore, this problem is compounded by interpretive problems.
Interpretive Issues
In understanding the determinants of global protectionism, we also need to address problems of aggregation and reaction. While we have considered the
adoption of protectionist measures in isolation, this
is unlikely to be the reality. Global protectionism,
particularly a desire to protect the domestic market
but retain open access to foreign markets, is unlikely
to be accepted by others and could be expected to
trigger retaliation. At the same time, it is important
to note that protectionist pressures do not arise in all
industries, just those most affected. As Roberts (2007)
suggests, globalization does not destroy jobs, although
it may destroy jobs in certain industries. The overall
gains from globalization are likely to far exceed the
costs. Furthermore, trade is only one factor affecting
the labor market; the impact of technological change
or a shift in tastes could be more significant.
A further complication arises when we recognize
the likelihood of reverse causation. One of the impacts
of globalization is its ability to reshape domestic politics.
The global protectionist debate has shifted beyond the
simple question of open versus closed markets to emphasize the threat of globalization to national economic and
cultural identity. This has had the effect of transcending
traditional political divides and of unifying national as
opposed to sectional interests (Meunier, 1999). Furthermore, the level of global protectionism is not independent of the international business environment. Many
commentators believe that levels of protectionism would
be much higher if the world economy had not been as
strong as it was until 2008.
conclusions
This article has examined the concept of global protectionism, a growing phenomenon in the global economy.
We have suggested that global protectionism has its
roots in the concept of economic nationalism and differs from traditional (trade) protectionism in a number
of ways. Compared with trade protectionism, global
protectionism has a broader scope in terms of geography, application, concerns, and measures applied. At
the same time, it has a much more selective focus, in a
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understanding the rise of Global Protectionism    335
DOI: 10.1002/tie thunderbird International Business review Vol. 53, No. 3 May/June 2011
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