shutterstock_307296260_1600x420.jpg

World—Protectionism threatens global trade growth

A steady increase in trade-restrictive measures is partly blamed for spiking uncertainty and clogging world trade (Chart 4). Given the threat to free trade, Argentina’s recent experience with trade barriers is a timely reminder of the self-harming nature of protectionism. In 2011, newly re-elected President Kirchner adopted measures to divert manufacturing from Asia and Mexico to Argentina. This included large taxes on items made overseas and requirements that importers match the value of imports with exports. This resulted in Subaru exporting chicken feet and Mitsubishi exporting peanuts. Faced with these restrictions Apple withdrew, but Blackberry obliged and shifted production to Tierra Del Fuego—a remote, sparsely populated province in southern Argentina. By the time the first Blackberry rolled off the line, it was two years out of date and cost twice as much as the Mexican version. Almost immediately, an untaxed and unregulated black market for smuggled Blackberrys emerged. The factory closed two years later amid a contracting economy and rampant inflation. 

Figure