Working Paper: CEPR ID: DP3707
Authors: Arye L. Hillman
Abstract: This Paper surveys the ways in which departures from free trade have been treated in economic analysis. Normative theories linked to classical arguments have shown how departure from free trade can enhance efficiency and increase social welfare. Positive perspectives with links to political-economy premises of public choice view departure from free trade as socially undesirable and consider why governments nonetheless at times choose not to adhere to free trade. In the first case, models propose how choosing to depart from free trade can be in the public interest. In the second case, decisions by government to depart from free trade are viewed as compromising the public interest. The distinctions provide the basis for an interpretive path through the literature on international trade policy.
Keywords: free trade; political interests; protection; public interest; special interests; strategic trade policy
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government interventions (H53) | improved economic outcomes (O49) |
| optimal tariffs (F13) | enhance domestic welfare (I38) |
| optimal tariffs (F13) | improve terms of trade (F14) |
| temporary protection for new industries (O25) | long-term gains in efficiency and social welfare (D61) |
| departures from free trade (F13) | efficient in presence of uncorrectable market inefficiencies (G14) |
| minimum wage laws (J38) | distort trade patterns (F14) |
| strategic trade policy (F13) | increased profits for domestic firms (F23) |
| strategic trade policy (F13) | captures rents in imperfectly competitive markets (D43) |