Modern State Protectionism: New Logic in the Age of Geo-economic Competition

Modern protectionism, unlike its historical analogue in the XIX – early XX centuries, is not just a set of tariffs to protect "infant" industries. It is a complex, multi-level and strategic policy deeply integrated into national models of innovative development, security assurance, and competition for technological leadership. Its main motivation has shifted from the pure economic benefits of individual industries to geopolitical and geo-economic competition, especially in the field of high technologies and ensuring the resilience of supply chains.

Evolution of Goals: From Industry to Security and Sovereignty

Classical protectionism (such as in the US or Germany in the late XIX century) was aimed at creating a national industry. Modern protectionism pursues broader goals:

Ensuring technological sovereignty and leadership. Countries strive to protect and develop critical technologies (artificial intelligence, quantum computing, semiconductors, biotechnology) considered as the foundation of economic and military power in the 21st century. Protectionism here is an instrument of techno-nationalism. Example: The US CHIPS and Science Act of 2022, with a budget of $280 billion, aims to attract semiconductor production to the US territory and directly limits recipients of subsidies for investments in advanced technologies in "concerning countries" such as China.

Creating resilient supply chains. The COVID-19 pandemic and the logistics crisis have exposed the vulnerability of global chains. Modern protectionism often takes the form of "friendly localization" (friend-shoring) or reshoring — transferring production to politically close countries or back home to reduce risks. This is not a rejection of globalization, but its segmentation by political criteria.

Protecting national security. The interpretation of security has expanded to economic and technological security. Foreign investments, especially in strategic assets (energy, data infrastructure, media), are subject to strict scrutiny. Mechanisms like the US Committee on Foreign Investment (CFIUS) have been granted enhanced powers to block transactions on national security grounds.

Reaction to "unfair" competition and protection of social standards. Many modern protectionist measures are formally justified by the fight against dumping, forced technology transfer, or environmental/social dumping (when goods are produced with low environmental or labor standards). The European Union's Carbon Border Adjustment Mechanism (CBAM), which will impose border carbon taxes on carbon-intensive imports from 2026, is a new "green" form of protectionism that protects domestic producers who bear the costs of decarbonization.

Instrumentarium: From Tariffs to "Hidden" Barriers

The arsenal of the modern protectionist is much broader than classical customs duties:

Subsidies and state financing ("pocketbook protectionism"). This is a key tool. Direct subsidies, tax incentives, preferential loans from state banks for priority industries. Examples: massive subsidies from the EU and the US for battery and electric vehicle producers (in response to years of support for these industries in China), China's "Made in China 2025" plan.

Technical barriers to trade (TBT) and sanitary/phytosanitary measures (SPS). Strict quality standards, environmental norms, certification requirements may de facto close markets for foreign goods, formally complying with WTO rules. For example, disagreements over standards for genetically modified products or meat processing.

Limits on the export and import of data. In the digital age, protectionism affects data flows. Legislation on data sovereignty (as in the EU, where Europeans' data must be stored within the Union) or restrictions on technology transfer (as in American export controls on advanced chips and equipment for their production in China) — this is new digital protectionism.

Procurement for state needs (Buy National policy). Rules requiring state structures to purchase goods with a high local content. The US has strengthened such requirements within infrastructure laws.

Cases and Consequences

The US-China trade war (2018-ongoing). The most vivid example of strategic protectionism. The US tariffs on hundreds of billions of dollars of Chinese imports, under the pretext of combating forced technology transfer and "unfair" trade practices, aimed not just to improve the trade balance but to slow down China's technological growth and restructure global supply chains. China's retaliatory measures were symmetrical.

European "green" protectionism. CBAM is a historical innovation. It aims to protect European industry (metallurgy, cement, fertilizers) from competition with more "dirty" producers in countries with soft climate regulation. This creates a new global standard and may lead to market fragmentation into "green" and others.

Japan and South Korea: protectionism in agriculture. Despite their developed economies, these countries have for decades maintained a very high level of protection (through tariffs, quotas, standards) for their agriculture, considering it a matter of food security and socio-cultural identity.

Criticism and Systemic Risks

Modern protectionism carries serious threats:

Inflation rise and decreased efficiency: Shielding markets reduces competition, which can lead to higher prices for consumers and less innovative companies.

Fragmentation of the global economy and "trade blocs": The world risks being divided into competing technological and trade spheres of influence (American, Chinese, possibly European), which reduces overall growth rates.

Escalation of conflicts and trade anarchy: Retaliatory measures lead to a spiral of restrictions, undermining the system of multilateral WTO rules, which are already in crisis.

"Poor protectionism": Developing countries that cannot afford large-scale subsidies are at a disadvantage, losing access to technologies and markets.

Conclusion: Protectionism as a New Norm

Modern protectionism is not a temporary deviation, but a structural element of a new geo-economic reality. It reflects the transition from the globalization paradigm based on comparative advantages and mutual benefits to the paradigm of competition between great powers, where the economy has become a battlefield for security and influence.

Its future will depend on the balance between:

Justified goals for ensuring sustainability and technological independence.

Risks of the breakdown of the global trading system, rising prices, and slowing innovation.

Thus, protectionism in the 21st century is a complex, multifaceted phenomenon where economic policy is inseparable from foreign and defense policy. Its effectiveness will be assessed not so much in terms of economic growth, but in terms of achieving strategic autonomy and maintaining competitive advantage in key future technologies.
© elib.ge

Permanent link to this publication: