the undermined efficiency with which labor, capital, and other factors of production are allocated under conditions of lessened competition and more restricted access to global markets, thereby inhibiting the innovation process and the consequent gains in productivity, a fundamental driver of growth. in addition, higher trade barriers also hamper to a significant extent the international transfer of technology, know - how and best business practices, foundations on which emerging and developing economies are particularly reliant. to the above one must add the adverse effects on confidence and financial conditions. in this respect, it may be useful to note that one of the main reasons behind the stagnation of private investment in my country for a significant period already, is precisely uncertainty related to trade negotiations with the united states and canada. thirdly, notwithstanding weakened demand pressures arising from subdued levels of activity, inflation is likely to adjust to the upside under a more protectionist environment. further to the direct effects on imports prices brought about by higher tariffs, less competition from abroad in labor and goods markets pushes domestic prices and wages upwards, while the abovenoted efficiency losses on the supply side of the economy ( including those resulting from the potential disruption of gvcs ) should act in a similar way. in fact, we must not forget that the effect of international trade on competition and production costs is one of the major explanatory forces for the period of low inflation that we have seen at the global level in recent years. as noted earlier, the hard evidence that to date can be gathered regarding the impact of the ongoing episode of increased protectionism in the global economy is still scant. if any conclusion can be drawn, it is that said effects have been relatively small, albeit not insignificant and definitely not to be overlooked. emerging market economies ( emes ) have faced tighter ( and tightening ) external financial conditions over the last several months, which have translated into declining capital inflows and the consequent pressures on their exchange rates. in addition to specific, idiosyncratic factors that have been at play, especially in instances where episodes of acute stress have been present, this has reflected fundamentally the tightening of monetary policy by the federal reserve, in an environment of global uncertainty deriving from a combination of factors. obviously, a more restrictive trade policy stance in the united states and other countries has been one of them, although the extent to which this has affected different economies is varied. in this regard, it is again relevant to refer to the mexican experience

) : “ from protectionism to prosperity ”, speech given at the northern powerhouse business summit, 5 july ; zornitsa kutlina - dimitrova and csilla lakatos ( 2017 ) : " the global costs of protectionism ", world bank policy research working paper no. 8277, december ; and organisation for economic co - operation and development ( 2016 ) : " the impact of changes in global trade costs ", box 1. 3 in chapter 1 of economic outlook, november. that a burst of protectionist actions would hardly take place in isolation. most likely, it would be accompanied by other negative events, such as currency wars, the implementation of inward looking policies in other areas and an additional backlash against globalization. in light of these considerations, it would be reasonable to take quantitative exercises like the ones described above as conservative estimates, or rough qualitative guides as to what we may face going down this path. indeed, it is difficult to understand why the world economy is again facing such high stakes, after the experience with protectionism during the great depression of the 20th century, and with the burden of the global financial crisis still present in many economies.