WTO and Protectionist Policies

Readers Question: explain how membership of the WTO constrains the use of protectionist policies by countries particularly in times of global recession and why?

This is just a brief answer. Membership of the WTO is supposed to regulate member countries to avoid placing tarriff and protectionist policies, without the prior approval of the WTO. In the case of disputes the WTO can get involved; usually they seek to promote free trade policies and are against unilateral increases in tariffs.

In a recession, tariffs often become more politically popular. The reason is that domestic industries see falling demand and falling output. Therefore, they are likely to lost profits. Tariff’s on cheap imports become a tool for possibly improving their business in these difficult times. Governments are more likely to follow the local political pressure and increase tariffs to protect local jobs. However, it is argued that tariffs lead to a deadweight welfare loss and therefore the WTO seek to promote free trade.

Advantages and disadvantages of WTO 

see also: role of WTO