Do free-trade economies typically offer any protection for domestic markets?

Question

The aimed-for outcome of the protectionist could be said to be the shielding of domestic markets from competition with an "unfair" advantage. For example, an emerging economy might have non-existent workers' rights enabling lower production cost.

However, discussions surrounding naive protectionist policies typically descend into "define a biscuit" type arguments. In short: the difficulty in defining the boundaries of tariffs quickly turns arguments to farce.

But there must be other, better ways to achieve the desired outcome. I have read that in the early 2000s Germany "protected" its intra-EU car sales by ensuring EU emissions regulations were closely aligned with the emissions of their own diesel engine technology making market entry by (for example) American cars with big petrol engines more difficult. Whether this is apochryphal or not, the point remains.

Do free-trade economies typically endeavour to protect themselves in ANY way, or does "free mean free" in the minds of these legislatures?

Answer 1

I think the (or at least, a) relevant concept is that of non-tariff barriers to trade. Wikipedia has a nice summary.

Let me quote a couple of sections from the article:

Non-tariff barriers to trade (NTBs) or sometimes called "Non-Tariff Measures (NTMs)" are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs. The SADC says, "a Non-Tariff Barrier is any obstacle to international trade that is not an import or export duty. They may take the form of import quotas, subsidies, customs delays, technical barriers, or other systems preventing or impeding trade." According to the World Trade Organisation, non-tariff barriers to trade include import licensing, rules for valuation of goods at customs, pre-shipment inspections, rules of origin ('made in'), and trade prepared investment measures.

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According to statements made at United Nations Conference on Trade and Development (UNCTAD, 2005), the use of NTBs, based on the amount and control of price levels has decreased significantly from 45% in 1994 to 15% in 2004, while use of other NTBs increased from 55% in 1994 to 85% in 2004. [...] The need to protect sensitive to import industries, as well as a wide range of trade restrictions, available to the governments of industrialized countries, forcing them to resort to use the NTB, and putting serious obstacles to international trade and world economic growth. Thus, NTBs can be referred as a new of protection which has replaced tariffs as an old form of protection.

So regulatory and similar barriers to trade have become widespread—often as a way to circumvent restrictions on protectionism.

Answer 2

I am not sure what you mean by 'free-trade economies', but yes, most countries/trade areas championing the free market do impose all sorts of tariffs. You can read about it on the World Trade Organizations homepage.

https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm

As you pointed out there are all sorts of other tools such as defining specifications for a product that foreign rivals would find difficult to meet in the short term. I would argue that this is frequently difficult to spot as it usually takes the guise of environmental or consumer protection.

Answer 3

The only protection that sincere free trade offers is the increased competivity forced by the "natural selection" against foreign competitors. Protected economies tend to accumulate competitive disadvantages, which in the long run, may overcome the barriers to trade.

Inserting distortions on the economy is like blocking the natural course of water. Market forces just accumulate until they grow beyond the point were they destroy the barriers.

But opening markets does not mean that anybody will collect the benefits. Free trade produces creative destruction of unfit competitors, so they use their influence to distort the market on his favor, with uncompetitive practices, and pressuring governments to introduce distortions favorale to themselves.

Answer 4

In addition to points made in other answers, the costs of transporting goods over long distances can act as a form of protection against imports. How significant they are depends to a considerable extent on the value-to-weight ratio of the goods: the lower the ratio the greater the addition to the total cost of imports. Also relevant is whether the goods are perishable and so require extra costs of preservation (eg refrigeration of meat). The quality of transport infrastructure is also a factor, and improvements may reduce transport costs but will not eliminate them altogether. Thus transport costs are a natural barrier to trade, which can be added to by poor infrastructure in either the exporting or the importing country.

As an example, this study by Kiringai (2006) found that transport costs added significantly to the costs of some exports from Kenya (see especially p 12).