Protectionism is the imposition of restrictions on some or all sectors of the economy ostensibly to “protect” national firms from foreign competition. While protectionism sounds like it could be beneficial, it is actually counterproductive and harmful. Protectionist measures reduce trade and investment, undermining the key drivers of innovation that lead to improvements in the quality of people’s life. After the First World War, many countries introduced new tariffs on imports, in order to protect domestic manufacturers. These tariffs contributed to the slowing of the world economy at the end of the 1920s. But instead of removing what were meant to be temporary “protective” tariffs, governments gradually increased them. One of the most obvious examples of this was the radical scaling up of US tariffs against foreign imports sanctioned by the US Smoot-Hawley Tariff Act of 1930. As many economists feared when Smoot-Hawley was proposed, the protectionist act immediately led to “retaliatory” tit-for-tat tariffs imposed by many other US trading partners. As a result, the world economy contracted yet further. The worldwide tariff hikes and retaliations, augmented by falling demand, cut U.S. trade from $9.6 billion in 1929 to $2.9 billion by 1932, and cut total world trade from $68 billion to $24 billion. The tariffs also reinforced nationalist sentiments and became yet another beacon of resentment. This combination of recession and economic nationalism led to the Second World War. Since the end of the Second World War, most countries around the world have gradually reduced their trade barriers – lowering tariffs, removing regulations and other restrictions. However, recently there have been some reversals and the sentiment in the US is ominous. In November 2008, leaders of the G20 countries committed themselves to the following (paragraph 13 of Ministerial statement, 15 November 2008): “We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.” Since then, 17 of the G20 members have introduced new protectionist measures! We must not forget the lessons of the disastrous protectionist policies of the 20s and 30s.