How neo-mercantilism, neo-infant industry protection, strategic trade theory and economic nationalism reshape global trade between 2018 and 2025 — with a focus on Georgia.
The aim of this study was to analyse how modern neo-protectionist economic doctrines, including neo-mercantilism, neo-infant industry protection, and economic nationalism, have been implemented in developing and advanced economies, with a specific focus on Georgia. The study evaluates the impact of these doctrines on economic performance, national security, and industrial policy, considering instruments such as tariffs, subsidies, digital service taxes, and non-tariff barriers. Through a quantitative-comparative method, empirical data from 2018 to 2025 were analysed, demonstrating how these protectionist strategies were adopted by both developed economies, such as the United States and the European Union, and developing countries, including Georgia, India, and Turkey. The research reveals that while advanced economies primarily use high tariffs and subsidies to support strategic industries, developing economies adapt these tools to local contexts to foster industrial growth, reduce dependence on foreign imports, and stimulate innovation. In Georgia, government support for agriculture and the promotion of information and communication technologies (ICT) have led to substantial economic growth, with the ICT sector contributing significantly to GDP and employment. Comparable cases from India, including a 60% telecom import substitution program, and Turkey’s cybersecurity investments, underscore the success of selective protectionism in strengthening domestic value chains, fostering innovation, and improving resilience in the face of geopolitical instability. Additionally, the study examines the political-economic drivers behind the adoption of protectionist measures, such as national security concerns, the need for industrial autonomy, and pressures from global competition. The implications of neo-protectionist trends for global trade governance, including the sustainability of the World Trade Organization and the rise of regional trade blocs, are also discussed. The study emphasizes the growing importance of strategic trade policies and non-tariff barriers in shaping the future of global trade, as countries navigate the tension between globalization and economic self-reliance. By combining theoretical analysis with empirical evidence, this article contributes to an understanding how neo-protectionism is reshaping global trade dynamics and offering valuable insights for policymakers in Georgia and other developing economies facing similar challenges. This research also highlights the need for a balanced approach to protect domestic industries while ensuring continued engagement in the global economy.
Modern protectionism differs fundamentally from classical forms: it is flexible, often covert, and aligned with national innovation and security goals. The study distinguishes four doctrines, each combining selective intervention with continued integration into the global economy.
Refocuses the purpose from bullion accumulation to industrial competitiveness and macro-financial sustainability, operating within the globalized economy and WTO frameworks.
Lineage: classical mercantilism (16th–18th centuries) — state control of trade flows and the accumulation of national wealth.
Holds that emerging domestic sectors lack the scale, expertise and market depth to compete, so temporary, targeted support is essential until they become competitive.
Lineage: Alexander Hamilton & Friedrich List; formalized by Ha-Joon Chang. Basis: dynamic comparative advantage.
Argues that government intervention can alter competitive dynamics in oligopolistic industries with increasing returns to scale, helping domestic firms achieve global competitiveness.
Lineage: Paul Krugman & James Brander, emerging in the 1980s.
Embeds health, safety and cybersecurity standards into trade regulation. A deliberate recalibration of sovereignty in the context of digital and technological globalization.
Increasingly deployed proactively — structuring market entry to privilege domestic firms.
The resurgence of neo-protectionist economic strategies between 2018 and 2025, amid deepening globalization and growing geopolitical uncertainties, highlighted the urgent need to reassess the balance between market liberalization and state economic sovereignty. Traditional frameworks of classical protectionism no longer sufficiently explained the complex mechanisms through which states sought to safeguard strategic industries, national competitiveness, and value-chain security. Modern approaches combined selective intervention with integration into the global economy, expressed through neo-mercantilism, neo-infant industry protection, strategic trade policies, and economic nationalism reinforced by regulatory non-tariff barriers.
Despite increasing scholarly attention, research gaps remained. Few studies systematically compared the theoretical evolution of neo-protectionism with its empirical implementation in different political and economic contexts, especially in developing economies. Existing literature largely focused on the United States, the European Union, China, and South Korea, leaving countries like Georgia underexplored, despite their growing reliance on targeted industrial support and non-tariff-barrier-based regulation to integrate into global markets. Addressing these gaps was critical for anticipating the future trajectories of global trade governance, including the regionalization of trade blocs and the resilience of the World Trade Organization (WTO) framework.
Contemporary research confirmed that modern protectionism differed fundamentally from classical forms: it is flexible, often covert, and aligned with national innovation and security goals. J. Douglas and T. Fairless demonstrated that countries such as the USA, China, and India have used export incentives, capital controls, and sovereign funds to enhance economic leverage, which has resulted in measurable growth of strategic sectors. Neo-infant industry protection, originating from Friedrich List, has regained prominence in high-tech sectors. Studies by S. Singh and Sh. Acharya and S. Barik confirmed that subsidies, temporary tariffs, and innovation funding have increased domestic production capacity and improved technology transfer in India and Vietnam, thereby reducing their dependency on external suppliers.
Strategic trade theory legitimized state intervention in globally competitive sectors. R. Cherif et al. and L. Rotunno and M. Ruta revealed that selective subsidies in aerospace and semiconductor industries allowed the EU, the USA, and South Korea to secure long-term market shares and stimulate domestic innovation. Research on Georgia demonstrated similar tendencies in a small open economy: state-supported programs in information and communications technology, agricultural exports, and real estate development increased national export capacity and created conditions for participation in regional value chains. Economic nationalism and regulatory non-tariff barriers represented another dimension of neo-protectionism — health, safety, and cybersecurity standards were embedded into trade regulations in India, Turkey, and Poland, producing measurable benefits for domestic producers and enhancing supply-chain security.
The aim of this study was to analyze how neo-protectionist doctrines were implemented in developing economies — particularly Georgia — and to evaluate their economic outcomes in the 2018–2025 period. To address this aim, the study pursued the following objectives:
Conducted between June and July 2025, the research combined a theoretical framework analysis with an empirical document-based study, tracing the evolution of protectionist doctrines from classical mercantilism of the 16th century to contemporary neo-protectionist strategies of the 21st century. Quantitative data were obtained from UN Trade and Development reports and used to classify protectionist trade measures adopted since 2020.
Eight countries were selected for the comparative analysis. The inclusion of both large economies (United States, China, India) and smaller open or transitional economies (Georgia, Poland, Vietnam) allowed an assessment of how these doctrines are adapted under different capacities for state intervention, with a specific emphasis on developing states such as Georgia. The selection was based on three criteria: documented implementation of neo-protectionist measures between 2018 and 2025; availability of official policy documents and legal acts in national or verified international repositories; and diversity of economic scale and institutional context.
Key materials included Section 232 of the Trade Expansion Act, which authorizes import restrictions on national security grounds; the CHIPS and Science Act, aimed at promoting domestic semiconductor production; India’s Production-Linked Incentive Scheme; and the Telecommunications Act of the Republic of Poland, which reflects non-tariff-barrier-based protection in critical infrastructure sectors. Policy instruments were categorized into three functional groups:
Tariffs, subsidies, and import quotas — the classic levers used to shield and restore domestic production capacity.
Sectoral aid, research and development funding, and export-linked incentives directed at globally competitive sectors.
Non-tariff barriers framed as health, environmental, or cybersecurity requirements that structure market access.
Protectionism has a long and developing history — from early mercantilist doctrines of the 16th and 17th centuries, through classical liberalism, to strategic trade theory, neo-mercantilism, neo-infant industry protection, and economic nationalism with regulatory non-tariff barriers. Each doctrine provides justification for protecting domestic industries and strategically regulating international trade.
Neo-mercantilism refocuses the purpose from bullion accumulation to industrial competitiveness and macro-financial sustainability, contributing across-the-board tariffs, selective export encouragement, import restrictions, and managed currency regimes to reduce trade and current account deficits, restore domestic manufacturing, minimize dependence on strategic imports, and enhance sovereign economic autonomy. In contradistinction to mercantilism, which relied on colonial trading monopolies, it operates within the globalized economy and international legal frameworks, often justifying intervention under advocacy or anti-dumping pretexts.
The renaissance is clearly visible in advanced economies such as the US. In April 2025, the United States implemented a broad 10% universal import tariff — the most comprehensive general tariff since the 1930s — accompanied by targeted increases: 34% on imports from China, 20% on European Union products, and 25% on imports from Canada and Mexico, referring to “national industrial security” under Chapter 232 of the Trade Expansion Act. These actions elevated the US average effective tariff to approximately 24%, a level not observed since the Smoot-Hawley Tariff Act of 1930 (when it reached 40% but applied to far fewer items). The current regime affects imports worth over USD 1.8 trillion. According to Global Trade Alert, as of March 2025 there were more than 4,650 active import-restrictive measures across G20 nations — a 75% increase compared to 2016.
The US current account balance, which was 2.6% of GDP, showed signs of recovery in early 2025, decreasing to 1.4% of GDP by Q1 2025 because of reduced imports and nearshoring. Similarly, India announced plans in 2025 to apply 1,100 product-specific tariffs, maintain tight quantitative restrictions on digital goods, and mandate 70% local sourcing in public procurement for infrastructure.
Building on the classic infant-industry argument of Alexander Hamilton and Friedrich List, this doctrine holds that emerging domestic sectors often lack the economies of scale, technological expertise, and market depth needed to compete with established foreign rivals. Ha-Joon Chang provides empirical evidence that virtually all industrialized countries — the USA, Germany, Japan, and South Korea — relied heavily on protectionist measures during their development periods. Contemporary adaptations advocate targeted industrial policy: production-linked incentives, local content requirements, export incentives and tax holidays, state-funded R&D, and temporary non-tariff barriers, justified on the basis of dynamic comparative advantage.
A notable modern implementation is India’s Production-Linked Incentive Scheme, launched in 2020 and expanded in 2022. With a budget exceeding USD 26 billion across more than 14 sectors, by June 2024 it had secured approximately INR 1.28 lakh crore (about USD 155 billion) in committed investments. The telecom and electronics sectors grew rapidly, with mobile phone value addition rising to 20% within three years — surpassing Vietnam’s 18% over 15 years — and achieving around 60% import substitution in telecom products. Over 700,000 direct and indirect jobs were generated, about 36% of the five-year target.
Despite these successes, the scheme faced challenges: as of October 2024 only USD 1.7 billion of the allocated USD 23 billion had been disbursed, output reached just 37% of initial targets, and manufacturing’s share of India’s GDP declined slightly from 15.4% in 2020 to 14.3% in 2024. Consequently, the scheme will not expand beyond the original 14 sectors. These mixed outcomes reflect broader patterns: South Korea’s strategic trade policies in automotive and clean energy, and China’s “Made in China 2025” initiative in robotics and renewable energy.
Strategic trade theory holds that targeted policies — export subsidies, R&D support, and preferential financing — can help domestic firms overcome entry barriers in oligopolistic industries. The United States exemplifies this through the CHIPS and Science Act, which allocated USD 52 billion to semiconductor manufacturing and R&D, aiming to raise domestic production from 12% to 28% of the global advanced chip supply by 2032. In South Korea, strategic interventions in the automotive sector led to a twelvefold increase in vehicle exports since the late 1980s, with Hyundai-Kia’s vehicle exports valued at USD 53.36 billion in 2024. China’s green technology sector grew rapidly, with clean-energy investments reaching CNY 6.3 trillion (USD 890 billion) in 2023, contributing 40% of China’s GDP growth.
A significant case is Georgia, which adopted a small-scale strategic trade approach focused on ICT and telecom. Between 2020 and 2023, ICT turnover rose from GEL 185 million to GEL 2.4 billion, with exports reaching USD 892 million. Employment grew sixfold to over 30,000, and average IT wages doubled, contributing 7.5% to real GDP expansion in 2023. In 2020–2024, foreign revenues of the Georgian IT sector increased 9.3 times, employees doubled, and average salary rose 2.1 times. In 2024, the ICT share in GDP was 6.4%.
In practice, economic nationalism uses digital services taxes as a regulatory tool. Currently, 18 countries — including Turkey (7.5%), Poland, France, and Canada — have imposed digital services taxes targeting multinational digital firms like Google and Amazon. One of the most prominent examples is the USA–China tech decoupling: since 2018 the USA has imposed tariffs on Chinese electronics reaching up to 145%, affecting a bilateral trade volume of USD 582 billion by 2024. The US Entity List, which restricts technology exports to Chinese companies, expanded from 130 entities in 2018 to over 530 in 2022, focusing on Huawei, ZTE, and SMIC. Globally, digital trade output has fallen by 7%, productivity by 2.9%, and prices have risen by 1.5% over five years due to these barriers.
Poland’s embrace of economic nationalism in the digital and telecommunications sphere reflects a strategic turn grounded in state sovereignty and national security. By October 2024, Poland had committed to spending nearly PLN 10 billion (approximately EUR 2.3 billion) on cybersecurity over the following two years. In mid-2024 it launched a “Cyber Shield” initiative allocating over PLN 3 billion. In 2023, Poland reported over 150,000 cybersecurity incidents — a 45% year-on-year increase — causing PLN 2.8 billion in direct financial losses. Legally, its Telecommunications Act (2004) obligates providers to store metadata for 12 months domestically, aligning with the EU’s GDPR framework and the upcoming NIS2 Directive. Poland also redirected PLN 30 billion (EUR 7.2 billion) from EU recovery funds to establish a comprehensive Security & Defence Fund.
The practical disclosures of neo-protectionist doctrines offer compelling evidence that globalization is undergoing a strategic adjustment rather than a linear decline. States are reasserting agency over trade regimes, industrial development and technological infrastructure. One critical insight is the transformation of protectionist logic from reactionary to anticipatory: policies once used responsively to shield industries from immediate shocks are now applied preventively to secure long-term strategic advantages. The US Trade Expansion Act, Section 232, has been mobilized not only to oppose immediate trade imbalances but also to redefine national security in economic terms, while the CHIPS and Science Act marks a paradigmatic shift, reflecting strategic trade theory’s claim that support in oligopolistic high-technology sectors is often necessary.
In the USA, China, and South Korea, strategic trade instruments are used to support domestic champions and to shape the global regulatory and technological environment. In the case of Georgia, the application of strategic trade thinking is modest but significant: Georgia has prioritized sectors where global competition is relatively low but growth potential is high — particularly logistics, construction, agriculture, and digital services — through targeted tax exemptions, simplified export procedures, and support for high-skilled labor training. While Georgia lacks the fiscal scope of larger economies, it identifies comparative advantage niches and builds national capability around them, adapting strategic trade doctrine through regulatory innovation rather than financial expenditure.
Neo-protectionist doctrines do not represent a retreat from globalization but rather a recalibration — redirecting openness toward selective and strategic engagement based on national interests and long-term sustainability.
One striking insight is that non-tariff barriers are now deployed proactively. Rather than acting simply as defensive mechanisms, they serve to structure market entry in ways that privilege domestic firms — evolving into instruments of state economic policy. Non-tariff barriers often escape WTO scrutiny because they are grounded in legitimate public policy objectives such as safety, ethics, or consumer protection, increasingly aligned with real governance challenges including digital privacy, health risk management, and environmental standards.
The overlapping use of different doctrines within a single country suggests a flexible approach to economic sovereignty. The US, for example, applies neo-mercantilism in macro-trade balances, infant industry protection in semiconductors, strategic trade in clean technology, and non-tariff barriers in digital infrastructure; China follows a similar pattern with more centralized execution. This layered approach indicates that modern protectionism is not about isolation but about selective integration, where openness depends on national priorities. Increasingly, governments present such measures not as narrow nationalist tactics but as frameworks for sustainability, inclusion, and long-term competitiveness.
| Doctrine | Exemplar economies identified in the study |
|---|---|
| Neo-mercantilism | ChinaUSAIndia |
| Neo-infant industry protection | USASouth KoreaChinaVietnamIndia |
| Strategic trade theory | USAChinaSouth KoreaEUGeorgia |
| Economic nationalism & NTBs | TurkeyPolandUSAChina |
This research has demonstrated that neo-protectionist economic doctrines are not transitional policy anomalies, but integral tools of contemporary economic governance across advanced, emerging and mobile economies. The empirical examination of neo-mercantilism, neo-infant industry protection, strategic trade theory and economic nationalism reveals a paradigm shift in global trading structure. These doctrines, although diverse in implementation, share a common rationale: the strategic preservation and advancement of national economic interests under the pressures of global interdependence and multipolar competition.
In the case of neo-mercantilism, the research identified ongoing patterns across China, the USA, and India, which employ export promotion, domestic industrial subsidies and targeted currency strategies not simply for protection but to shape global market positions. Neo-infant industry protection — analysed through the USA, South Korea, China, Vietnam, and India — illustrates how powers develop key sectors through time-bound but targeted interventions, fostering the transition from technological imitation to innovation leadership and validating classical assumptions about dynamic comparative advantage in industrial catch-up.
The study also sheds light on the evolution of strategic trade theory from abstract models into concrete policies in the USA, China, South Korea, the EU, and notably Georgia, whose integration of academic insights and policy frameworks shows how even smaller economies operationalize these theories to recalibrate their global positioning. Regarding economic nationalism and regulatory non-tariff barriers, the findings underscore how Turkey, Poland, the USA, and China use non-tariff tools — from digital services taxes and data localization laws to cultural regulations and investment assessment — as instruments for both market control and value-system protection. These barriers are neither accidental nor simply reactive: they constitute a deliberate recalibration of sovereignty in the context of digital and technological globalization.
The practical significance of this study lies in its integrated comparative approach, which emphasizes the adaptability and cross-regional relevance of neo-protectionist instruments. National strategies, although shaped by unique domestic contexts, now converge in their proactive engagement with the global economic system. The study faced certain limitations, including restricted availability of disaggregated policy impact data, especially from the Global South, and rapid technological and geopolitical changes mean some findings may soon require updating. Future research could examine how neo-protectionist frameworks intersect with environmental policy, labor markets, and digital sovereignty, as well as their social costs and distributive effects. Overall, the study reaffirms that contemporary states remain central actors in shaping global trade dynamics — not through isolation, but via strategic engagement.
