International Political Economy:

Free Trade

The case for free trade. Critics.

Introduction

• Increasing conflict over trade issues

– Debates over trade policy

– Occasional violent protests at global

economic summits

The Liberal International Order:

Principle (Ideal) of Free Trade

A. Institutions

1. World Bank

2. International Monetary Fund

3. GATT (WTO 1995)

The Liberal International Order:

Principle (Ideal) of Free Trade

B. Origins of Post-War Liberal Order

1. Lessons of 1920s and 1930s: protectionism leads to depression, which leads to fascism, which leads to war

2. Free trade serves the interests of the US

3. Theoretical/philosophical/ideological belief in universal benefits of free trade; free trade as enlightened self-interest

The Case for Free Trade

A. The origins of free trade

1. Adam Smith, David Ricardo, and the battle over the Corn Laws

2. The division of labor and the theory of comparative advantage

B. Major arguments for free trade: efficiency and the primacy of the consumer

1. We should practice free trade among nations just like we practice it within nations: the economic logic does not change because national borders are crossed

The Case for Free Trade

2. Free trade always benefit consumers (and

everyone is a consumer)

C. The obstacles to free trade

1. Traditional barriers such as tariff and quotas

2. Nontariff barriers

Criticisms of Free Trade

A. More efficient, but so what?

1. Almost everyone concedes arguments about

efficiency

2. Question is whether there are other criteria

that should sometimes outweigh economic

efficiency

B. The difference between national and

international trade

1. National borders do not change the economic

case for free trade, but they add an important

political component

Criticisms of Free Trade

2. Nations need to worry about the

consequences of dependence in ways

people within nations do not

3. Consumer interests do not always advance

the interests of the nation or society as a

whole

C. A different approach

– Strategic trade policy

Conclusion

• Why so much conflict now?

A. Differences in philosophy

B. End of Cold War