Trade matrices for trade negotiators, applied to ‘Brexit’ and ‘NAFTA’: an approach

This paper puts forth a new scholarly approach to trade negotiations, for practitioners of international agreements, or simply to business students attempting to understand Ricardian trade theory. The paper hypothesizes that matrices can provide a simpler conceptual framework for considering Ricardo’s comparative advantage, especially when multiple goods and multiple countries are involved, in order to determine which countries should produce which goods. Numerous theoretical examples are presented, singularly, and jointly, as are different possible flaws and assumptions, additional applications, and alternative uses of the matrices, such as employing matrices to increase production of certain goods needed during crises or shortages. The article also argues that “terms of trade” should not be “assumed” in trade models but be based upon indifference curves, and addresses other influencing factors such as neoclassical changes in utility or in production. Found valid, the paper applies this method of trade simplification to pressing international situations, the question of “Brexit,” the sobriquet for the United Kingdom’s effort to withdraw from the European Union, which creates interesting possibilities for new trade deals, and the renegotiation of the North American Free Trade Agreement (NAFTA). The conclusion conceptually compares bilateral and multilateral trade, singularly, and with all countries together.