IS FREE TRADE DESIRABLE? BROAD ISSUES AND ILLUSTRATIONS AUTARKY vs FREE TRADE FREE TRADE SEEMS MORE DESIRABLE BECAUSE OF ……GAINS FROM SPECIALISATION…..AA AND CA THEORIES……PRODUCTIVITY HIGHER AND OUTPUT HIGHER…….GAINS FROM LOWER AC….ECONOMIES OF SCALE…INTRA INDUSTRY THEORIES

GAINS IN CONSUMER AND PRODUCER CHOICE…..PRODUCT DIFFERENTIATION GAINS FROM AVAILABILITY…OIL AND RAW MATERIALS…..CLIMATE DETERMINED PRODUCTS SERVICES…SUN HOLIDAYS LESS DESIRABLE IF NO TRADE

ISSUE IS MAINLY LESS PROTECTION OR MORE LIBERALISATION…. CURRENT TRADE TALKS IS DEALING WITH REDUCING PROTECTION AND HAVING A MORE LIBERAL TRADE SYSTEM INEFFICIENT AND EFFICIENT COUNTRIES CAN GAIN FROM TRADE…CA

CA RESULTS ON ASSUMPTION OF PERFECT MOBILITY OF LABOUR INTERNALLY AND ZERO MOBILITY EXTERNALLY WHAT IF DIFFICULT TO MOVE LABOUR INTERNALLY…….SPECIALISATION NOT AS QUICK…UNEMPLOYMENT LESS DEFINITE THAT TRADE IS DESIRABLE….AT LEAST NOT IMMEDIATELY “WRONG” TYPES OF PRODUCTS WITH CA

AGRICULTURE……..RAW MATERIALS….LOW INCOME/PRODUCTIVITY PRODUCTS….LOW INCOME ELASTICITY DESIRE TO AVOID CURRENT CA INFANT INDUSTRY ARGUMENT IMPACT

OVERALL….COUNTRIES WITH MORE LIBERALISED TRADE POLICIES GROW QUICKER TRADE INCREASES COMPETITION AND EFFICIENCY PROTECTION SUPPORTS LACK OF COMPETITION AND INEFFICIENCY INCREASES DOMESTIC COSTS CARROT AND STICK

ACCESS TO EXPORT MARKETS NEEDS WILLINGNESS TO OPEN OWN MARKETS CHINA AND EU JAPAN AND REST OF WORLD EXPORT GROWTH…LARGE MARKETS….ECONOMIES OF SCALE…NORMALLY WILL NOT HAPPEN WITHOUT ALLOWING IMPORT ACCESS MUTUAL ACCESS…THEREFORE LIBERALISATION OF TRADE

AUTARKY…UNDESIRABLE FULL FREE TRADE IMMEDIATELY???? ACCESS TO EXPORT MARKETS WITHOUT RECIPROCAL DOMESTIC MARKET ACCESS….MAY BE DESIRABLE BUT UNLIKELY

EVEN WITH PROTECTION DOMESTIC RESOURCES WILL TEND TO FLOW TO AREAS OF CA CAPITAL MOBILE WHY INVEST IN SECTORS WHICH NEED PROTECTION TO SURVIVE PROTECTION IS UNCERTAIN AND DEPENDS ON THE GOVT

LABOUR UNWILLING TO WORK IN LOW WAGE SECTORS FREE TRADE GIVES ACCESS TO LOWEST PRICES AND WIDEST RANGE OF TECHNOLOGY FREE TRADE MAY KEEP AN ECONOMY IN “WRONG” PRODUCTS SMALL COUNTRIES

CONSIDERATION OF THE ABOVE ISSUES NO DEFINITE ANSWER IT DEPENDS………. ECONOMIC AND CULTURAL STRONG AND WEAK INDUSTRIES/ECONOMIES SPEED OF IMPLEMENTATION READING