Controversies in Trade Policy
As we have seen, the theory of international trade policy, like the theory of
international trade itself, has a long, intellectual tradition. Experienced
international economists tend to have a cynical attitude toward people
who come along with “new” issues in trade—the general feeling tending to be
that most supposedly new concerns are simply old fallacies in new bottles.
Every once in a while, however, truly new issues do emerge. This chapter
describes three controversies over international trade that have arisen over the
past quarter-century, each raising issues that previously had not been seriously
analyzed by international economists.
First, in the 1980s a new set of sophisticated arguments for government intervention
in trade emerged in advanced countries. These arguments focused on the
“high-technology” industries that came to prominence as a result of the rise of the
silicon chip. While some of the arguments were closely related to the market failure
analysis in Chapter 10, the new theory of strategic trade policy was based on
different ideas and created a considerable stir. The dispute over high-technology
industries and trade subsided for a while in the 1990s, but it has recently made a
comeback as new concerns have emerged about U.S. innovation.
Second, in the 1990s a heated dispute arose over the effects of growing international
trade on workers in developing countries—and whether trade agreements
should include standards for wage rates and labor conditions. This dispute often
widened into a broader debate about the effects of globalization; it was a debate
played out not just in academic journals but also, in some cases, in the streets.
More recently, there has been growing concern about the intersection between
environmental issues—which increasingly transcend national boundaries—and
trade policy, with a serious economic and legal dispute about whether policies
such as “carbon tariffs” are appropriate.
LEARNING GOALS
After reading this chapter, you will be able to:
• Summarize the more sophisticated arguments for interventionist trade policy,
especially those related to externalities and economies of scale.
• Evaluate the claims of the anti-globalization movement related to trade
effects on workers, labor standards, and the environment in light of the
counterarguments.
272 PART TWO International Trade Policy
• Discuss the role of the World Trade Organization (WTO) as a forum for
resolving trade disputes and the tension between the rulings of the WTO
and individual national interests.
• Discuss the key issues in the debate over trade policy and the environment.
As we have seen, the theory of international trade policy, like the theory of
international trade itself, has a long, intellectual tradition. Experienced
international economists tend to have a cynical attitude toward people
who come along with “new” issues in trade—the general feeling tending to be
that most supposedly new concerns are simply old fallacies in new bottles.
Every once in a while, however, truly new issues do emerge. This chapter
describes three controversies over international trade that have arisen over the
past quarter-century, each raising issues that previously had not been seriously
analyzed by international economists.
First, in the 1980s a new set of sophisticated arguments for government intervention
in trade emerged in advanced countries. These arguments focused on the
“high-technology” industries that came to prominence as a result of the rise of the
silicon chip. While some of the arguments were closely related to the market failure
analysis in Chapter 10, the new theory of strategic trade policy was based on
different ideas and created a considerable stir. The dispute over high-technology
industries and trade subsided for a while in the 1990s, but it has recently made a
comeback as new concerns have emerged about U.S. innovation.
Second, in the 1990s a heated dispute arose over the effects of growing international
trade on workers in developing countries—and whether trade agreements
should include standards for wage rates and labor conditions. This dispute often
widened into a broader debate about the effects of globalization; it was a debate
played out not just in academic journals but also, in some cases, in the streets.
More recently, there has been growing concern about the intersection between
environmental issues—which increasingly transcend national boundaries—and
trade policy, with a serious economic and legal dispute about whether policies
such as “carbon tariffs” are appropriate.
LEARNING GOALS
After reading this chapter, you will be able to:
• Summarize the more sophisticated arguments for interventionist trade policy,
especially those related to externalities and economies of scale.
• Evaluate the claims of the anti-globalization movement related to trade
effects on workers, labor standards, and the environment in light of the
counterarguments.
272 PART TWO International Trade Policy
• Discuss the role of the World Trade Organization (WTO) as a forum for
resolving trade disputes and the tension between the rulings of the WTO
and individual national interests.
• Discuss the key issues in the debate over trade policy and the environment.
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