The problem with protectionism is not merely a problem with Western protectionism. An even bigger problem is poor country protectionism. Countries generally need more trade, that means not only exports but also imports. Imports are needed for the consumers and for competition and specialisation in the economy, and to fight monopolies. And low import tariffs are needed for exports as well. Something like 40 per cent of exports from developing countries go to other developing countries. If, then, poor consumers are forced to pay heavy prices for products from companies in their own country, they are prevented from buying from companies in the neighbouring countries, in which case the producers will also lose by this policy. They may get a monopoly of their own market, but on the other hand, they are stopped to sell to other markets. This destroys specialisation, which is an engine for growth. Developing countries’ tariffs against other developing countries today are more than two and a half times higher than the industrialised countries’ tariffs against developing countries. Thus more than 70 per cent of the customs dues which developing countries are forced to pay are levied by other developing countries. Poor countries would benefit more from poor country liberalisation, than from rich country liberalisation.
This is an excerpt from ‘Globalisation and the Poor’. Find the full document here.