Protectionism & the Chinese Economic Miracle

It is sometimes argued that the success of East Asia results from an embrace of neoliberal laissez faire economics. Analysts point to the high ratio of imports and exports to the size of East Asian economies as evidence that these countries were extraordinarily "open" to the global economy and thus able to rush past the countries of Sub-Saharan Africa and Latin America which were generally wealthier, in per capita income terms, fifty years ago than all of the East Asian economies.

This argument cannot be sustained by the historical record. Most of the economies of East Asia have protected their domestic markets. State-sponsored or state-owned companies in these countries then used the profits (economic rents) generated from the domestic markets to subsidize manufactured exports to the West, and most importantly to the United States. In this way, these countries were able to swiftly move up the economic and technological ladder, shifting into high-return activities characterized by enormously high  technological and economic barriers to entry. In a classic article from 1993, Robert Wade explored this pattern in the cases of South Korea and Taiwan. [1]

This pattern holds not only for South Korea and Taiwan, but also the historically all-important case of China. China retained high import tariffs well into the 1990's (at least fifteen years into the "Reform and Opening" period) and even in 2012 Chinese tariffs for most categories of industrial goods range from three to ten times the levels of US tariffs, even though China is considerably more industrialized than the United States, and is in important respects more developed than its largest export market.

The first graph below shows average Chinese tariff rates for 1992. In the second graph, I compare Chinese average tariffs in 2012 with comparable US averages by industrial product category.

[1]  Robert Wade. 1993. "Managing Trade: Taiwan and South Korea as Challenges to Economics and Political Science." Comparative Politics. 25(2): 147-167.