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Are Free Trade Agreements Always Beneficial?

In: Who's Afraid of John Maynard Keynes?

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  • Paul Davidson

    (University of Tennessee at Knoxville)

Abstract

Free trade agreements such as NAFTA are based on a 19th century conclusion of classical theory entitled the law of comparative advantage. If free trade is permitted classical theory states each nation should specialize in particular industry in which it had a comparative cost advantage and the result will be global full employment and more goods and services available for everyone. The Keynes theory argues that comparative advantage is only applicable for foreign trade in minerals and climate affected industries such as agriculture. For all mass production manufacturing industries, free trade favors nations that do not treat its workers in a civilized manner but instead production occurs under “sweatshop” conditions. Free trade in manufacturing industries is destructive to prosperity and full employment conditions in developed nations Poicies are necessary to prevent free trade if production occurs in foreirgn factories under “sweatshop” conditions.

Suggested Citation

  • Paul Davidson, 2017. "Are Free Trade Agreements Always Beneficial?," Springer Books, in: Who's Afraid of John Maynard Keynes?, chapter 0, pages 127-140, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-64504-9_9
    DOI: 10.1007/978-3-319-64504-9_9
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