Not too long ago words like trade protectionism and isolationism were dusty terms as the global economy grew yearly at a breakneck pace. Now with the collapse of markets around the world, governments are increasingly looking at ways to ensure the stimulus dollars spent by taxpayers stay in their own countries.
As an example, the latest stimulus bill in the U.S. had, for a time, a measure for all iron and steel used for publicly funded projects to be produced in the United States. The only exemption from this rule is if complying would increase the cost of the project by 25% or more.
Protectionism in the past did more damage than good
During the Great Depression, the United States passed the Smoot-Hawley Act which started record increases in tariffs. A destructive round of competitive tariff increases between countries followed. According to government statistics, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934.
The protectionist agenda was a direct factor in this reduction of global trade and exacerbated the worldwide depression in economic activity.
Pressure is mounting for "Buy American" campaigns