Valuable Lessons of International Trade Theory

In this section some of the most important lessons in international trade theory are briefly presented. Often, the lessons that are most interesting and valuable are those that teach something either counterintuitive, or at least contrary to popular opinions. A number of these are represented below. Each explanation also provides links to the pages where the arguments are more fully explained. (Note: For most students, following the links initially may be more confusing than helpful. However, once reading through many of the chapters, review of these lessons may help reinforce them).

1. The main support for free trade arises because free trade can raise aggregate economic efficiency.

2. Trade theory shows that some people will suffer losses in free trade.

3. A country may benefit from free trade even if it is less efficient than all other countries in every industry.

4. A domestic firm may lose out in international competition even if it is the lowest-cost producer in the world.

5. Protection may be beneficial for a country.

6. Although protection can be beneficial, the case for free trade remains strong.

International Trade Theory and Policy - Chapter 5-5: Last Updated on 6/13/06