The Theory of Trade Policy and Trade Agreements: A Critique

Wilfred Ethier ()

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: During the past half century, multilateral trade liberalization has reduced tariffs to historically low levels. The Received Theory of multilateral trade agreements, based solely on terms-of-trade externalities between national governments, offers an explanation that has become the conventional wisdom among international trade theorists. But it displays two puzzles that cast doubt on its practical relevance: the Terms-of-Trade Puzzle and the Anti-Trade-Bias Puzzle. This paper examines the consistency of the implications of the Received Theory with actual trade policy. The basic conclusion is that the theory is inconsistent with reality. Furthermore, it is the role of terms-of-trade externalities — the central component of the Received Theory — that is the sole cause of this inconsistency.

Keywords: Political externalities; trade agreements; the Received Theory; the Terms-of-Trade Puzzle; the Anti-Trade-Bias Puzzle (search for similar items in EconPapers)
JEL-codes: F02 F13 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2002-11-23, Revised 2006-06-05
New Economics Papers: this item is included in nep-int and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://economics.sas.upenn.edu/sites/default/file ... ng-papers/06-013.pdf (application/pdf)

Related works:
Journal Article: The theory of trade policy and trade agreements: A critique (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:06-013

Access Statistics for this paper

More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().