What is the impact of protectionist trade policies on innovation and productivity growth?

Abstract

The paper examines the complex issue of the association between protectionist trade policies and global trends in innovation and productivity growth, based on secondary sources in established organizations, including the World Bank, OECD, IMF, and NBER. Since the late 2010s, which has seen the revival of protectionism, with the average tariff over the globe rising by 2.6% to 3.3% and increased non-tariff barriers, has considerably reassessed international investment flows, supply chains, and the ecosystem of innovation (World Bank, 2024). Although protectionist policies are frequently politically assigned as a way to protect local industries and jobs, the growing evidence shows that these policies restrict the dynamics of innovations by preventing the diffusion of technologies and access to intermediate goods that are essential in research and development (Akcigit and Ates, 2022; Shu and Steinwender, 2018). There is empirical evidence that shows a heterogeneous effect in the countries and in the sectors: the advanced economies gain in the short term with a stable output, but a declining patenting activity but the emerging economies sometimes document adaptive innovation responses via import substitution R&D (Miroudot & Nordström, 2020). In addition, the effect of protectionism on productivity is manifested in low-firm-level competition, inefficient allocation of resources, and low total factor productivity (TFP) growth. This paper provides an input to the comprehension of the impact of increasing economic nationalism in the areas of technological development and economic efficiency in the longterm by synthesizing the recent quantitative research and trend data in 20002025 (OECD, 2025). The results highlight the fact that the longterm innovation-based growth relates more with open trade systems than closed policy regimes.