What Difference Does Trade Make?

Abstract

Trade is important, although those of us who have special interests as scholars or direct participants in exporting and importing should not be guilty of overestimating its importance. Achieving free trade in all products, agricultural as well as non-agricultural, will not bring the millennium; poor countries will not immediately, or even in the longer run, become rich as a result; nor will high-income countries realize major gains in national income that can be used to meet the costs of curing their social ills, such as poverty, urban congestion, crime or pollution. Achieving free trade is only one of a number of policy measures that governments can undertake to improve the efficiency with which their economies function and thus increase the national welfare. In saying this I do not imply that the only component of national welfare is more output-more income. But most of the social and economic problems that beset all countries, rich and poor, can be met more easily from a larger rather than a smaller national output.