Free Trade Among the Industrialised Nations?

Abstract

The main theme of this book is that there exist sets of conditions under which some departure from free trade may be warranted. The three major reasons for invoking some sort of discrimination against foreign goods are that:

• (a) a nation’s economy may suffer a temporary loss of competitiveness because of transitory disturbances (frequently in the financial sector). Or an important industry may temporarily lose its international competitiveness but this competitiveness may be regained (to a substantial degree at least) by improving the industry’s domestic efficiency. This will take time and conditional protection is warranted to allow the temporary conditions to evanesce or to allow the needed improvement in domestic efficiency to be achieved

• (b) the speed of adjustment imposed by the free action of market forces could be excessive and inflict unnecessarily high social costs. Under such conditions protection is warranted to slow down (but not to stop) the process of adjustment

• (c) the combination of new labour-saving technologies (chips and robots), together with the enhanced ability of labour-surplus nations to supply manufactured goods which meet the quality requirements of the industrialised world, will create chronic unemployment for low-skilled workers