ARGUMENTS FOR FREE TRADE
Arguments centre around MARKET ACCESS and what it offers.
Total surplus
• Increases total production (in total, from a world view) because exploits comparative advantage
- Increases revenue (in total)
- Increases jobs (in total)
- Increases consumption (in total)
• Increases efficiency because, in the global market, production and consumption expands
• Eg: 1994 Uruguay Round trade deal added between $109 billion and $510 billion to world income (WTO)
Sharing
• Knowledge transfer
• Structural change driven by market discipline and new technologies
• Human rights, political ideals
ARGUMENTS AGAINST FREE TRADE
There are 2 categories of arguments
a) The practical arguments i.e. “We can’t do it.”
b) The ‘in-principle’ arguments i.e. “Even if we can do it, it’s not good.”
Process versus outcome
• Political power influences negotiations and legitimacy of discussions.
• Bargaining process may be pushing to a non-free trade equilibrium that tilts advantage in favour of one party.
• Eg: Scientific risk assessment of agricultural products in Australia includes trade representatives on the US-Australia SPS Committee, and substitutes right to appeal to WTO.
The compensation principle
• Free trade may increase total surplus, but even then it does not benefit market participants individually.
- Different markets may gain differently
- Different par ...