International Trade - Commercial Policy
Following a brief historical introduction and a discussion of different types of commercial policy, this paper reviews the arguments for and against trade protection. In the bench-mark case of a competitive, small, open economy, free trade maximizes aggregate national welfare, although some individual groups will lose unless compensation is actually paid. Guidelines for policy include the uniform reduction and "concertina" rules for tariff cuts, and the principle of targeting - corrective measures should be applied as close to the source of the "distortion" as possible. Relaxing the bench-mark assumptions allows exceptions to the case for free trade - "optimal" tariffs to manipulate world prices; "strategic" tariffs or export subsidies when home firms engage in oligopolistic competition with foreign rivals; and infant industry protection to allow home firms benefit from learning by doing. Protection can also raise the growth rate, though it is less likely to raise welfare in a growing economy. Overall, with due allowance for some ambiguity, both theoretical arguments and empirical evidence suggest a pragmatic case for free trade. Finally, the paper notes the political pressures for and against protection, and the role of international institutions such as the GATT in underpinning moves towards freer trade.
|Date of creation:||13 Oct 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Neary, J.P. & Leahy, D., 1998.
"Strategic Trade and Industrial Policy Towards Dynamic Oligopolies,"
98/14, College Dublin, Department of Political Economy-.
- Neary, J Peter & Leahy, Dermot, 2000. "Strategic Trade and Industrial Policy towards Dynamic Oligopolies," Economic Journal, Royal Economic Society, vol. 110(463), pages 484-508, April.
- D Leahy & J.P. Neary, 1998. "Strategic Trade and Industrial PolicyTowards Dynamic Oligopolies," CEP Discussion Papers dp0409, Centre for Economic Performance, LSE.
- J. Peter Neary & Dermot Leahy, 1998. "Strategic trade and industrial policy towards dynamic oligopolies," LSE Research Online Documents on Economics 20246, London School of Economics and Political Science, LSE Library.
- Leahy, Dermot & Neary, J Peter, 1998. "Strategic Trade and Industrial Policy Towards Dynamic Oligopolies," CEPR Discussion Papers 1968, C.E.P.R. Discussion Papers.
- Bagwell,K. & Staiger,R.W., 1998.
"An economic theory of GATT,"
15, Wisconsin Madison - Social Systems.
- Anderson, James E. & Neary, J. Peter, 1992.
"A new approach to evaluating trade policy,"
Policy Research Working Paper Series
1022, The World Bank.
- J. Peter Neary, 2000.
"International Trade and the Environment - Theoretical and Policy Linkages,"
200018, School of Economics, University College Dublin.
- J. Neary, 2006. "International Trade and the Environment: Theoretical and Policy Linkages," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(1), pages 95-118, 01.
When requesting a correction, please mention this item's handle: RePEc:ucn:wpaper:200123. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nicolas Clifton)
If references are entirely missing, you can add them using this form.