Trade protection is as old as trade. If someone produces something better or cheaper than they do, people are inclined to turn to authorities (political, social or religious) to try to stop this competition via different mechanisms – politicians could introduce a tariff on imports, create entry obstacles such as discriminatory standards and licensing, leading social actors can call for ‘’buy local / national products’’ campaign, while religious leaders can preach about the evils of capitalism and profits that make people buy products coming from infidel countries. As time changed, so did the technique of protectionism – in medieval times only local artisans were able to produce and sell their products in towns, and now protections takes place at the national borders, with tariffs, quotas, and other non-tariff barriers.
Why is protectionism so popular? Mostly due to ‘’foreigner bias’’, a psychological trait that makes people naturally distrustful of people coming from other groups. Also, trade is often considered as a zero-sum game – looking only at the visible consequences of international trade such as closed factories or lay off workers but disregarding the invisible ones such as cheaper and more abundant goods that increase incomes of the others, which in turn provides new employment opportunities. On the other hand, entrepreneurs hope for protectionism because it would increase their profits, and it is often cheaper and easier than competing with companies from abroad. However, in some cases political considerations take precedence. The history of Russian trade relations clearly demonstrates this.
Although Russian trade relations are recently best known for the trade sanctions arising from the conflict in Ukraine, there is a clear pattern of trade restrictions that do not follow the protectionism logic closely – in most parts, a protectionist party wants to support its own existing industry at the local market or provide incentives for establishing new ones. However, trade restrictions that the Russian Federations has implemented often disregard this import substitution policy: in some cases, imports are banned for products that not even produced at all in Russia. However, these trade restrictions are often connected to political relations with countries from which these imports come from. Basically, Russia has in several cases targeted important sectors (mostly in agriculture) of countries with whom it had diplomatic fallout or bad relations. This policy was targeting mostly small post-Soviet economies, partly because of their geographical location in an area considered of strategic importance for Russia, but also because of the importance, the Russian market has traditionally had for these countries.
In 2006 Russia banned imports of wine from Georgia and Moldova when these countries showed stronger inclinations towards integration in the EU or NATO, no matter if these aspirations were feasible or not. In the Georgian case the bad diplomatic relations between the two countries later even led to an armed conflict in 2008. In 2009 there was a ban on milk and dairy products from Belarus, in the wake of deteriorating relations, and a bid for Russian participation in the privatization of major milk producers. In 2014, after Moldova signed the Association Agreement with the EU, Russian introduced a ban on imports of fruits and vegetables. Also, as a response for sanctions against a number of high profile individuals and companies linked to the Russian government by the US and the EU after the Ukraine crisis, the Russian Federation introduced the ban for import of agriculture products from these countries.
In hindsight – this protectionist policy has not proven to be successful. In cases where production could have been improved and trade-oriented towards new trade partners due to low trade barriers, these restrictions did not make for a change in political attitude the Russian establishment was hoping for. Moldova and Georgia improved the quality of their wine and reoriented themselves towards the Western markets. However, in the case of Belarus, this politic did tilt the scales since it was almost impossible for their dairy products to be sold in the EU due to the very high protectionist measures that European agriculture has been enjoying since the introduction of the CAP. The conflict in Ukraine is yet to be resolved, so it is still too early to see what will be of this Russian policy.
All in all, this Russian targeted protectionist policy has proven to be unsuccessful. It just led to the unnecessary impoverishment of the Russian citizens, who had to pay higher prices for foodstuffs or get by with lower quality products. Trade wars seldom lead to peaceful negotiations and mediations of open issues. They usually lead to more confrontation and decrease in the economic prosperity of all included parties. In this age of new protectionist policies, this is good to remember.
Check the Freedom Barometer ranking for 2017 of Russia.