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Retrospectives: Challenges to Free Trade

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  • Douglas A. Irwin

Abstract

The recent theoretical literature on strategic trade policy suggests that government intervention in international trade has the potential to be welfare improving. Government promotion of exports from imperfectly competitive industries, for example, may enable domestic firms to capture economic rents from foreign firms, thereby increasing national welfare. In addition, active responses to foreign protection, by a policy of reciprocity, may be required to prevent a loss of domestic welfare. Although these findings may bring into question the traditional economic case for free trade, many economists doubt that these theories provide sound guidance for trade policy. Economists in the nineteenth century also argued about whether theoretical justifications for tariffs compromised the case for free trade. This paper discusses two older debates somewhat related to the current focus on strategic industries and reciprocity, and concludes with an observation about how developments in economic theory affect economists' view of policy.

Suggested Citation

  • Douglas A. Irwin, 1991. "Retrospectives: Challenges to Free Trade," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 201-208, Spring.
    • Handle: RePEc:aea:jecper:v:5:y:1991:i:2:p:201-08
    Note: DOI: 10.1257/jep.5.2.201
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.5.2.201
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    References listed on IDEAS

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    1. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-144, Fall.
    2. Irwin, Douglas A, 1988. "Welfare Effects of British Free Trade: Debate and Evidence from the 1840s," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1142-1164, December.
    3. Corden, W. Max, 1990. "Strategic trade policy : how new? how sensible?," Policy Research Working Paper Series 396, The World Bank.
    4. Mill, John Stuart, 1874. "Essays on Some Unsettled Questions of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 2, number mill1874.
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    Cited by:

    1. D. Nayyar, 1996. "Free trade: why, when and for whom?," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 49(198), pages 333-350.
    2. Norgaard, Richard B. & Liu, Xuemei, 2007. "Market governance failure," Ecological Economics, Elsevier, vol. 60(3), pages 634-641, January.
    3. D. Nayyar, 1996. "Free trade: why, when and for whom?," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 49(198), pages 333-350.
    4. Bilge Aykol & Dayananda Palihawadana & Leonidas C. Leonidou, 2013. "Research on the Import Activities of Firms 1960–2010," Management International Review, Springer, vol. 53(2), pages 215-250, April.
    5. Daw Ma, 2014. "Can Emerging Market Protectionism Be Beneficial?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(9), pages 1175-1189, September.

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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