It is for the first time in years that all major economies are experiencing positive growth. Giant strides in technology are being taken, which has the potential to change our lives. At the same time, protectionism and divisiveness seem to be on the rise. This is a major cause of concern and may bring down growth and stall progress.On March 8, the Donald Trump government in the US imposed an import tariff on steel and aluminium, and the next day, Trump proclaimed on Twitter, “When a country is losing many billions on trade with virtually every country it does business with, trade wars are good, and easy to win.” In India, too, it seems, after more than two decades of gradual opening up of the economy, protectionist forces are gaining ground.In the latest Union Budget, import duties were hiked for a range of products.In the short run, these measures can be popular in respective countries. But they can derail economic growth across the world, significantly worsening long-term prospects of improving people’s lives, particularly so in emerging economies. Irrespective of what Trump believes, trade war and a competitive hike in import duties can easily make a dent on economic activities across countries.There are several other ways globalisation helps economic growth. Trade liberalisation, on an average, increases growth rate of countries, even though the experience across economies is somewhat diverse. The effect is stronger in countries with appropriate policies and institutional features. In India, even at a state level, as the 2018 Economic Survey points out, there is a strong correlation between the prosperity of the state and inter-state and international trade.So, can protectionism, in the form of import duty hikes, be justified? Two possible reasons are often cited: to reduce trade deficit, and to boost domestic manufacturing. However, it is far from clear that either objective can be achieved by increasing import duties and installing other protectionist measures.First, there’s the issue of trade deficit— is it bad for a country to run a trade deficit? There does not seem to be any systematic evidence of a relationship between trade deficit and growth. Often, a lurking fear motivated by mercantalist ideas spurs people to decry trade deficit. There is a relation between the trade deficit and investment flows and exchange rate.Trade deficit implies the country is buying more from the rest of the world than selling to it. This, of course, has to be funded. If this happens through an inflow of funds to the country—which may bridge the capital shortfall in an emerging economy like India—is that necessarily a bad thing?Also, increasing import duties may not always result in reduced trade deficits. If an intermediate good becomes more expensive for an exporter, then the competitiveness of the exporter decreases and can, in turn, reduce exports, thus worsening the trade deficit.Take the case of increasing duties on the import of automobile parts in India. India was slowly developing as ahub for exporting cars for several Indian and multinational automakers. Now, if due to increased duty, auto parts become more expensive, exports of cars could fall. This may actually increase the trade deficit.So, will increasing import duties lead to increased domestic manufacturing? The hope is that increased tariff will make foreign producers less competitive and provide a cushion to domestic manufacturers, who, it is expected, will expand to fill the gap. This assumption is rather naïve. As mentioned above, this may actually lead to lower output of products higher up in the chain (such as cars), as production cost rises due to increased cost of inputs (such as auto parts).It may also be useful to remind ourselves of India before 1991. India followed an ‘import substitution’ growth strategy and was practically a closed economy, with several barriers to trade, like high import duties and heavy licensing requirements. This neither resulted in a trade surplus, nor was it a desirable place for cross-border investment. Instead, it resulted in a series of crises in the 1980s culminating in the major crisis of 1991.By increasing import duties, GoI seems to be searching for an easier route rather than asking the harder but more pertinent question: why are Indian firms not that competitive?Here, it is useful to look at the productivity in Indian manufacturing, which is considerably lower than in many other countries. Why is this so? What affects productivity in Indian manufacturing? One observation made in an ongoing Shiv Nadar University study is that competition in particular sectors is an important determinant of productivity. There is evidence that foreign competition pushes firms in emerging markets to innovate and become more competitive, both in manufacturing and services. Thus the irony that increasing import duties may actually hurt these sectors.The writer is Head, Department of Economics, School of Humanities and Social Sciences, Shiv Nadar University, Greater Noida, Uttar Pradesh