New Trade Theory Versus Old Trade Policy: A Continuing Enigma

Posted: 29 Feb 2008

See all articles by Sonali Deraniyagala

Sonali Deraniyagala

University of London, School of Oriental and African Studies (SOAS) - Economics

Ben Fine

University of London - School of Oriental and African Studies (SOAS)

Date Written: November 2001

Abstract

This paper examines the theoretical and empirical grounds for trade liberalisation. We note that many of the conventional arguments relating to the static and dynamic gains from liberalisation are based on fragile theoretical grounds. We also show that, although new trade theory takes account of some of the complexities of international trade and although the analytical thrust of many models justifies intervention, such policy conclusions are rejected even by those at the forefront of these theories on the grounds of political economy arguments which do not stand up to careful scrutiny. Finally, we show that arguments favouring trade liberalisation are not supported by existing empirical research, which generally fails to capture the complex and ambiguous effects of liberalisation and openness.

Keywords: Trade, Trade policy, Country and industry studies of trade

JEL Classification: F12, F14, F43

Suggested Citation

Deraniyagala, Sonali and Fine, Ben, New Trade Theory Versus Old Trade Policy: A Continuing Enigma (November 2001). Cambridge Journal of Economics, Vol. 25, pp. 809-825, 2001, Available at SSRN: https://ssrn.com/abstract=873655

Sonali Deraniyagala (Contact Author)

University of London, School of Oriental and African Studies (SOAS) - Economics ( email )

London, WC1E 7HU
United Kingdom

Ben Fine

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

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