Protectionism

Theories of Protectionism

Most theories of protectionism focus on the demand for protection raised by pressure groups. In pressure group models, groups seek protectionism from the state to increase their incomes. The task for scholars has been to try to explain more specifically which groups will seek protection and under what conditions they will be successful in getting it. The theoretical basis for the source of trade preferences is usually traced to one of two models: Heckscher-Ohlin or Ricardo-Viner. The Heckscher-Ohlin model argues that factors of production (land, labor, capital) have very low specificity—thus, they move freely among sectors. If a country moves from free trade to protectionism, the income of factors in which a country is relatively scarce will rise, while the income will decline for factors in which a country is relatively abundant. According to the Stolper-Samuelson theorem, scarce factors will then demand protectionism, while abundant factors will oppose it. The Ricardo-Viner model posits that factor specificity is very high, thus factor income is industry or sector specific. The factors involved in import- competing sectors will therefore lose from free trade, while those attached to export-oriented sectors will gain income from free trade. Unfortunately, neither model explains how trade policy preferences are actually translated into political action.

Pressure group models require more than similar interests in increasing income to overcome the collective action problem associated with securing protectionism. If collective action were not a problem, then consumers who largely gain from free trade should easily organize to defeat any movement toward protectionism. Olson has suggested that small groups with specialized interests are easier to organize to secure rents from the state than large groups with diffuse interests, such as consumers. Geographic concentration and firm concentration are sometimes seen as useful proxies for collective-action costs, since spatial proximity may reduce the costs of organizing to secure protectionism.

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