Consumer nationalism will lead to the downfall of free trade

The post-coronavirus world will not only be shaped by its policies, but by its narratives. By appealing to the desire to protect domestic economies, nationalism is likely to become a defining feature of consumer behaviour in the years to come.

Multiple countries have launched “buy domestic” initiatives as part of national efforts to alleviate the economic consequences of the pandemic. The idea was vehemently endorsed by farmers in the UK who urged the public to buy British and support local agriculture.

Even more strikingly, French finance minister Bruno Le Maire told supermarkets to “stock French products”, showing a complete disregard for the ethos of the single market. This is just a hint of what is to come.

Such rhetoric was triggered mainly by the disruption of supply chains as a result of emergency measures. Most governments were unprepared for the outbreak of a deadly virus, and this has made them appear weak and incapable.

Though well-intentioned, rushed decisions such as lockdowns are a consequence of an economic, moral and mental gridlock that governments found themselves in. It is very human to blame everyone but oneself, so governments – which failed to ensure a free flow of goods in case of emergency – chose to blame their reliance on imports from other countries.

It’s an easy solution, and a frightened electorate will likely buy into the self-sufficiency narrative. Combine it with nationalism and trade barriers and the downfall of free trade will be unavoidable.

The concept of consumer nationalism was developed by the University of South Carolina’s Terence Shimp and Subhash Sharma. It is used to refer to consumers’ beliefs “about the appropriateness, indeed morality, of purchasing foreign-made products”. Ethnocentric consumers believe that purchasing imported products should be avoided because “it hurts the domestic economy, causes loss of jobs, and is plainly unpatriotic”.

Unlike tariffs and other trade barriers, consumer nationalism can be enforced independently and often doesn’t have to be paired with tangible interventions such as putting domestic products on front shelves in supermarkets. 

The power of consumer nationalism is that it has a propensity to impact economic events and move the needle away from free trade. At its core, “buy British to save the economy” is a very simple narrative that speaks to our sense of identity and our desire to contribute to the revival of the economy.

Spread through media and the word of the mouth, narratives affect consumer behaviour more than we can imagine. No one has explained the phenomenon better than Robert Shiller, a professor at Yale University, who argued that economic events are substantially driven by the contagious spread of oversimplified and easily transmitted variants of economic narratives. 

The most popular anti-trade narrative is that free trade destroys jobs, and its spread is far-reaching. In 2016, a CBS poll asked Americans: “Overall, would you say US trade with other countries creates more jobs for the US, loses more jobs for the US, or does US trade with other countries have no effect on US jobs?”

Roughly 15 per cent of respondents said that trade has little or no effect on the number of jobs. Around seven per cent were unsure. Of the others, 29 per cent thought trade created jobs and 48 per cent thought it destroyed them.

When asked outside the job narrative context, 43 per cent of respondents said that free trade helped the economy while 34 per cent said it hurt it. The most ironic part is that the prevalence of anti-trade narratives is an excellent way for governments to justify actual interventions. 

Milton Friedman once said: “The way you solve things is by making it politically profitable for the wrong people to do the right things.” If we apply this logic to narratives, it turns out that the intentional spread of narratives makes some policies politically profitable in the long run since the nudged electorate comes to believe it’s in their interest to pay more for domestic products – because we have to save the economy! 

As such, the “buy domestic” narrative is a voluntary nudge that may or may not work, and there is nothing wrong with it, per se. After all, some consumers really want to pay more for domestic products.

The worry, however, is that it might, in the end, be translated into import restrictions and leave no choice to those who prefer imported goods. The voice of the minority of consumers – who don’t want to make what is framed by governments as a “necessary sacrifice” – will be left out.

Trade has lifted billions of people out of poverty by expanding our consumer choice through lower prices and increased variety of goods. It hasn’t got the credit it deserves, and the average person probably doesn’t realise that by buying foreign goods they are engaging in a global-wide exchange that has, among other things, enhanced peaceful relations between countries. 

The pandemic is a test for us all, and we are all looking for something in our world order to blame. Free trade isn’t what caused the pandemic, but it is what can help make the post-coronavirus world better. And that is the narrative that needs championing more than ever.

Originally published here.


The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org

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