Buy national and protectionism in the great recession: Can it work?

Abstract

Against the backdrop of the considerable increase in protectionist measures that could be observed during the recent financial crisis, this article investigates the following questions: Are 'Buy National' clauses a suitable instrument to internalise the externality that arises because the stimulating effect of 'general', non-discriminatory government spending is distributed among many countries, while the cost of the stimulus is borne by only one country? Are shortterm trade policies, like import tariffs, export subsidies and 'Buy National' policies, suitable policies to mitigate an economic downturn?