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Free Trade vs. Protection, and Preferential Trade Cooperation

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Book cover International Trade Theory and Policy

Part of the book series: Springer Texts in Business and Economics ((STBE))

Abstract

This chapter explicitly examines the main arguments in favour of protectionism and the rebuttal of them by the advocates of free trade; here the theory of second best will throw new light on this age-old debate. We shall then go on to examine preferential trade cooperation among countries. This cooperation has the purpose of reducing or eliminating protection among the participating countries, and may take various forms, but in any case the main question is whether these countries are better off.

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Notes

  1. 1.

    This cannot happen with the curves drawn in Fig. 11.1, but it is conceivable that it may happen with other curves.

  2. 2.

    This amounts to saying that protection has enabled sector A to benefit from technical progress in a broad sense. On technical progress and (free) international trade see Sect. 13.5.

  3. 3.

    It is also possible for the signal to be too strong, so that the country overspecializes in the right direction and overshoots the optimal point. See, for example, Chacholiades (1978, pp. 509–510).

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Authors and Affiliations

  1. Accademia Nazionale dei Lincei Classe di Scienze Morali, Rome, Italy

    Giancarlo Gandolfo

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  1. Giancarlo Gandolfo
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Gandolfo, G. (2014). Free Trade vs. Protection, and Preferential Trade Cooperation. In: International Trade Theory and Policy. Springer Texts in Business and Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-37314-5_11

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  • DOI: https://doi.org/10.1007/978-3-642-37314-5_11

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