How Might Trade Agreements Lead To Political Change

Economists have had enormous influence on trade policy and provide a strong justification for free trade and the removal of barriers to trade. Although the objective of a trade agreement is trade liberalization, the actual provisions are strongly marked by national and international political realities. The world has changed enormously since David Ricardo proposed the law of comparative advantage, and in recent decades economists have changed their theories to take into account the trade of factors of production such as capital and labor, the growth of supply chains that today dominate much of world trade, and the success of neo-Mediterranean countries in achieving rapid growth. And the foreign response to the Smoot Hawley tariffs of 1930 became understandable from this perspective. Since the United States had tried to place the burden of its crisis on foreigners, it had little choice but to reciprocate by trying to do the same. Their policy of retaliation in trade further reduced the United States. Adam Smith and many economists after him claim that the goal of production is to produce goods for consumption. . . .

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