Free Trade and Its Alternatives

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Book Chapter


Economics (CMC)

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This article begins by reviewing the basic case for free trade in terms of the workhorse factor-proportions model. The conclusions of this “benchmark” model are then stress-tested by removing each of the key assumptions in turn. Not surprisingly, the case for free trade becomes less airtight, as a variety of specific market situations arises in which trade-based barriers such as tariffs or nontrade interventions such as production and other subsidies can produce superior welfare outcomes. But these theoretical findings of superiority do not necessarily translate into interventionist policy prescriptions, because in many cases the costs associated with practical implementation may exceed the expected benefits.

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© 2012 Oxford University Press

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