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Are Economists' Traditional Trade Policy Views Still Valid?

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  • Robert E. Baldwin

Abstract

Recent analysis of trade policies under imperfectly competitive market conditions as well as in situations where trade in high-technology products is important have raised doubts whether economists should continue their traditional opposition to trade taxes and subsidies. This paper evaluates the new theoretical arguments for interventionist trade policies by comparing them with the traditional arguments for and against free trade, investigating the empirical evidence supporting the conditions assumed in the new models, appraising the realism of the behavior assumptions of these models and the sensitivity of their conclusions to changes in these assumptions, and considering the political economy implications of these conclusions. The general conclusion is that there are serious practical difficulties with the interventionist arguments of the 'new' trade theorists, as they themselves recognize, just as there are with such traditional arguments for trade intervention as the terms-of-trade case for protection. However, the new industrial organization approach to trade theory has already provided valuable insights into trade behavior in international markets and promises to provide many more as more realistic behavior models are developed.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3793.

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Date of creation: Jul 1991
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Publication status: published as Journal of Economic Literature (June 1992): 804-829.
Handle: RePEc:nbr:nberwo:3793

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Cited by:
  1. Carter, Colin A. & Wilson, William W., 1997. "Emerging differences in state grain trading: Australia and Canada," Agricultural Economics, Blackwell, vol. 16(2), pages 87-98, May.
  2. Pierre Jacquet & Patrick Messerlin & Laurence Tubiana, 1999. "Le cycle du millénaire," Sciences Po publications info:hdl:2441/8543, Sciences Po.
  3. Steve Dowrick, 1994. "Openness and Growth," RBA Annual Conference Volume, in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia.
  4. Kox, Henk L. M. & Van der Tak, Casper M., 1996. "Non-transboundary pollution and the efficiency of international environmental co-operation," Ecological Economics, Elsevier, vol. 19(3), pages 247-259, December.
  5. Gebhard Kirchgässner, 2011. "Wissenschaftlicher Fortschritt in den Wirtschaftswissenschaften: Einige Bemerkungen," CREMA Working Paper Series 2011-09, Center for Research in Economics, Management and the Arts (CREMA).
  6. Deepak Lal, 1997. "From Planning to Regulation: Towards a New Dirigisme?," UCLA Economics Working Papers 774A, UCLA Department of Economics.
  7. Deepak Lal, 1993. "Trade Blocs and Multilateral Free Trade," Journal of Common Market Studies, Wiley Blackwell, vol. 31(3), pages 349-358, 09.
  8. Gilroy, Bernard Michael, 1998. "International Competitiveness, Multinational Enterprise Technology Clubs and the Government Interface," MPRA Paper 17983, University Library of Munich, Germany.
  9. Parry, Ian, 1998. "The Costs of Restrictive Trade Policies in the Presence of Factor Tax Distortions," Discussion Papers dp-98-37, Resources For the Future.
  10. Aykut Kibritçioglu, 2002. "On the Smithian origins of "new" trade and growth theories," Economics Bulletin, AccessEcon, vol. 2(1), pages 1-15.
  11. Klodt, Henning, 1992. "Theorie der strategischen Handelspolitik und neue Wachstumstheorie als Grundlage für eine Industrie- und Technologiepolitik?," Kiel Working Papers 533, Kiel Institute for the World Economy.
  12. Klodt, Henning, 1993. "Theorie der strategischen Handelspolitik und neue Wachstumstheorie als Grundlage für eine Industrie- und Technologiepolitik," Open Access Publications from Kiel Institute for the World Economy 2031, Kiel Institute for the World Economy (IfW).
  13. Koester, Ulrich, 1993. "International trade and agricultural development in developing countries: Significance of the Uruguay Round of GATT negotiations," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 8(4), June.
  14. William Milberg, 1999. "The Rhetoric of Policy Relevance in International Economics," Macroeconomics 9904009, EconWPA.
  15. Carter, Colin A. & Wilson, William W., 1997. "Emerging differences in state grain trading: Australia and Canada," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 16(2), May.
  16. Marcel Fafchamps, 2007. "Human Capital, Exports, and Wages," Economics Series Working Papers GPRG-WPS-069, University of Oxford, Department of Economics.

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