chapter  13
17 Pages

Import Restraints and Industrial Performance: The Dilemma of Protectionism

Withtheinternationalizationofmarketsandtheprogressiveliberalizationof worldtrade,thethreatofforeigncompetitionhasrevivedtheage-oldcryfor

protectionism:toprotectthenation'sbalanceofpayments,toprotectdomestic

laborfromimport-inducedunemployment,andtoprotectdomesticindustryfrom

theunfaircompetitionoflowwagecountries.Theseargumentsareparticularly

appealingintimesofrecession,andpoliticalofficeseekersarenotloathto

embracethem,especiallyinelectionyears. Foranindustryconstrainedtoliveinafreetradeenvironmentwhereitis

strivingforsurvival,profitability,andgrowth,foreigncompetitionisaserious

challenge.Itisadisruptiveforcewhichunderminesthemarketcontrolof

oligopolizedindustriesandthecartel-likepricemaintenanceschemesprevalent

inmanycompetitiveindustries.Itcausesinstabilitybyundermining"mutual dependencerecognized,"bypromotingdefectionamongcartelpartners,andby

encouragingentry.Foreigncompetitionisthenemesisoforderlymarketingand

hencebecomesaprimetargetforneomercantilistgovernmentsandtheinterest

groupswhichmanipulatethem. Itisthethesisofthisarticlethattheremediesfortheimportproblem-quotas,

orderlymarketingagreements,triggerpricesystems,andthelike-donotpro-

videadequatemechanismsforinsuringacceptableindustryperformanceorprotectingthepublicinterest.Insteadofcompelling-orevenpromoting-thekindof

structuralandbehavioralchangeswhichareimperativeifanindustryistoovercomeitscompetitiveinfirmities,theseprotectionistdevices,moreoftenthannot,

arelikelytohavepreciselytheoppositeeffect,i.e.,toperpetuatetheveryinfir-

OriginallypublishedinMichiganYearbookofInternationalLegalStudies,vol.1, 1979;reprintedwithpermission.