There has been much ado  about Nigeria's initial refusal to sign the African Continental Free Trade Area agreement.  Nigeria should be skeptical about throwing open all protectionist barriers. While some reasons given by various stakeholders may not pass the smell test, protecting local industries is a valid reason.

You may counter that by asking what industries are there to protect?  and you may have a valid point.

It is interesting to observe the irony of the most protectionist nations being the loudest champions of free trade. Also, no developed nation did so without protectionism, despite what neo-liberal economists would have us believe.

A good book on the subject is Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.

Lets's take a look at the world through a protectionist lens:

Britain

To advance the woollen industry (which was their most advanced industry in the 15th and 16th century), the Tudors increased the tax on the export of raw wool, and temporarily banned its export. Henry VII later withdrew his ban on raw wool exports when it became clear that Britain did not have the capacity to process all the raw wool it produced. Britain's relationships with its trading partners and colonies were on terms that were beneficial to British interests (e.g. the Navigation Act of the 18th century which required that all trade with Britain should be conducted on British ships). In 1820, Britain’s average tariff rate on manufacturing imports was 45–55%, when the rest of Europe were at  6-20% levels. Britain imposed an outright ban on advanced manufacturing activities that it did not want developed in its colonies e.g. rolling and slitting steel mills in America. This forced the Americans to specialize in low value pig and bar iron, rather than high value steel products. They also banned exports from colonies that competed with its own products, home and abroad. It banned cotton textile imports from India (‘calicoes’), which were then superior to the British ones. In 1699 it banned the export of woollen cloth from its colonies to other countries (the Wool Act). This destroyed the Irish woollen industry and stifled the emergence of woollen manufacture in America. It was not until 1860 that tariffs were completely abolished. In other words, Britain adopted free trade only when it had acquired a technological lead over its competitors.

America

In his Wealth of Nations, Adam Smith, the father of free market economics, advised the Americans not to develop manufacturing. He argued against any attempt to "stop the importation of European manufactures". Adam Smith was a patriot more than he was a free market economist. He supported free market and free trade only because he thought they were good for Britain as we can see from his praise of the Navigation Act and his advice against the development of American manufacturing.

It isn't hard to see that his advice would benefit the more developed nations (Britain) to the detriment of the developing nations (America). Luckily for America, Alexander Hamilton and others disagreed.

Alexander Hamilton (not Friedrich List) is the father of protectionism. The core of his idea was that a backward country should protect its infant industries from foreign competition and nurture them to the point where they could stand on their feet. In fact, he invented the term "infant industry".

In addition to Abraham Lincoln being the Great Emancipator of the American slaves, he was also the Great Protector of American manufacturing. Lincoln was a strong advocate of infant industry protection. His industrial tariffs were the highest ever in US history, and the world at that time.

Germany, Sweden, France, Finland, Austria, Japan, Taiwan, Korea etc achieved rapid development behind protectionist barriers.

Japan

Japan developed not through high tariffs, but through tightly controlling imports through control over foreign exchange. They promoted exports to maximize the supply of foreign currency needed to buy up better technology. They used direct and indirect export subsidies as well as information and marketing help from JETRO (Japan External Trade Organisation). They channeled subsidized credits into key sectors through directed credit progams. Foreign investments were heavily regulated, banning them in key industries or placing a hard ceiling of 49% on foreign ownership. Foreign companies were required to transfer technology and buy specified proportions of their inputs locally. They also regulated the inflow of technologies, to make sure that obsolete or over-priced technologies were not imported.


Finland, Norway, Italy and Austria – which were all relatively backward at the end of the Second World – all actively used SOEs to upgrade their industries. In Finland, Norway and Austria, the government was very much involved in directing the flow of bank credit to strategic industries. Finland heavily controlled foreign investment. In Italy, local governments provided support for marketing and R&D to small and medium-sized firms.

India is currently singing from the protectionist hymn book, with favourable results. They recently passed on the unenviable title of "poverty capital of the world" to us.

Though the most common, tariffs are not the only tool in the protectionist tool box. There are patents, product quality standards, public investment in infrastructure, subsidies, various forms of export incentives, R&D grants, state-owned enterprises etc.

We should  protect local economies like we do our children. We provide for all their needs during infancy. We are fine with them being entirely dependent on us. We don't send them out into the labour market to compete with adults. But, we expect them to stand on their feet and fend for themselves in adulthood.

National interests should take precedence over free-trade talking points. Also, the countries we look up to and want to be like when we "grow up" do same. No worries, we can join the free-trade choir after we've grown up.

Photo by Cole Patrick on Unsplash.