The Present Need to Reconsider the Free-Trade Doctrine

Forty years after the end of the Second World War, the momentum for greater freedom of international trade has been exhausted. The Tokyo Round was its last hurrah. These forty years of remarkable gains in the reduction of impediments to international trade, and in the volume of international trade, may come to be known as the golden years of the General Agreement of Tariffs and Trade (the GATT). Now, in the eighties, the forces of protectionism are gaining strength and clamour against imports is heard throughout the industrial world. Ranged against these resurgent forces for protectionism are conservative politicians who have complete faith in the workings of a system of markets, and a hard core of international economists who rank any departure from unsullied free trade with one of the deadly sins. Both groups cleave to the doctrine of free trade with something approaching a religious fervour. This fervour, on the part of the economists at least, probably derives from the destructiveness of the protectionism of the thirties, and possibly from the preoccupation of modern economics with formal welfare analyses. There is a close affinity between the orthodox, factor-proportions theory of international trade, and the derivative doctrine of free trade, and welfare economics. Both are based on models which are severely constrained in their applicability to reality by the assumptions under which they are developed.