A note on the ethics of free trade (original) (raw)
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An Evaluation of David Ricardo's Theory of Comparative Costs: Direct and Indirect Critiques
SSRN Electronic Journal, 2000
Following Smith's advocacy of free trade and competition, David Ricardo attempts to strengthen his theory of absolute advantage, which excludes from international trade countries which have no advantages over others, by eliminating this weakness. To do so, Ricardo introduces to the economics literature a theory of comparative cost advantage which includes countries that do not have absolute advantages in international trade. In Ricardo's framework, these countries can still gain from free trade. We present direct and indirect critiques which reveal that their advocacy of free trade is questionable. In our direct critiques we find that Ricardo's attempt is questionable for the following reasons. First, the scale of production of cloth in Portugal and that of wine in England equal 1 even though there is no reason to believe that two countries have the same scale of production for two different commodities. Second, it is argued that his theory is incomplete because it is based on particular numbers, does not determine the terms of trade, and does not take into account the unintended curtailment of demand in both countries, which in turn can make trade non-beneficial for both countries. In our indirect critiques, first we argue that Ricardo assumes the equality between the relative price and relative labor cost of two commodities even though they are different. Second, it is shown that the outcome of complete specialization in his theory prevents a country from specializing in the production of a commodity that could generate for it a substantial profit in the long run, locking the country out of industrialization. We then point out that Samuelson who supports Ricardo's theory to some extent does not consider in his proof the possible destruction of the domestic industry in the case of free trade, even though this might make domestic consumers worse off and also lock a country out of industrialization. . The author is grateful to an anonymous referee for very helpful comments and suggestions.
The vast majority of the books and articles that have been written over the past few centuries about trade policy in general and protectionism in particular have been written from a utilitarian perspective. Indeed, it would only be a slight overstatement to say that the only works written about protectionism have been written from a utilitarian perspective. The reason for this fact is that most analyses on protectionism are written either by economists or by people who adopt the ideas of economists to support their positions. And economists tend to be utilitarians. Those who have political agendas will tend to incorporate only those sources that support their own view and ignore or downplay opposing views, but even biased commentators use utilitarian arguments to support their positions. This paper takes a distinctly different approach. Rather than starting from a utilitarian premise, it begins from the premise that conduct that violates human rights is improper, then examines whether protectionism violates human rights. Part II presents an overview of the utilitarian approach to the examination of protectionism. Part III points out the deficiencies in the utilitarian approach and offers an alternative approach based on property, contract and association rights. The author concludes that the only trade policy that does not violate human rights is a policy of total, immediate and unilateral free trade. An extensive bibliography with links to more than 100 trade articles is also included.
The Common Arguments for Fair Trade
In this article I consider the connection between individual morality and Fair Trade goods. In particular, I consider whether a number of arguments commonly advanced in defence of Fair Trade can defend the conclusion that individuals ought to purchase Fair Trade goods in particular, or whether they are sufficient to show only that purchasing Fair Trade goods is one of a number of acceptable ways to meet more general moral duties. Although various points are made in the article, its main theme is that it is difficult to show that purchasing Fair Trade goods is, even in one way, preferable to donating to charity, at least without advancing certain highly contentious moral claims. I argue that unless defenders of Fair Trade can address these issues, it will be difficult to defend the view that individuals should purchase Fair Trade goods in particular.
The debate about trade: some small steps towards one
This paper addresses the discussion about the desirability of international trade. It starts out from the stylized observation that trade economists and 'anti-globalists' not only reject each others conclusions, but also the validity of the reference frame in which the other side makes its arguments. We mend for this problem, constructing a rational dialogue between the various parties by making differences in criteria and modes of analysis explicit. Instead of seeking to develop a comprehensive common framework, we adopt a 'pluralist' position, in which we only create a common structure in so far as necessary for meaningful dialogue. We judge the effects of trade as they follow from both the analytical models used by proponents and opponents and from the perspectives of both the criteria used by proponents and opponents. Applying different criteria to both standard and poverty-sensitive trade models, we find that both camps have valid cases, but also that diagonally opposite positions do not necessarily lead to different judgements regarding the desirability of trade. Once differences in preconceptions and criteria are cleared, a fruitful debate is therefore possible. We conclude that the debate about free trade cannot be settled by economics and should in the end take place in the moral and political arena. * Since the comparative advantage models discussed here only deal with comparative static analysis, distinguishing between a short and long run perspective is irrelevant in these cases.
2017
This paper has two aims. Its first purpose is to spell out some implications of the “Sraffa-Ruffin reading” of Ricardo’s exposition of the comparative advantage theory, according to which the “four magic numbers” in his famous numerical example refer, not to unit labour coefficients, but to the labour contents of given (unspecified) amounts of the two goods traded between England and Portugal.1 The implications I want to emphasize concern the following points (of which the first two have already been recognized more widely):2
Protectionist trade policies: a survey of theory, evidence and rationale
2006
ROTECTIONIST pm-essures have been mounting won-idwide during the 1980s. These pn-essmmres are due to various economic problems incltnding the lam-ge and persistent balance of tn'ade deficits in the United States; the har'd times expenienced by seven-al industries; and tire show growth of many foreign countn-ies.' Pn-oponents of protectionist trade policies amgue that international trade has contributed substantially to these problems and that protectionist tmade policies will head to improved n'esults. Professional economists in the United States, however-, generally agree that tmade restn-ictions such as tariffs and quotas substantially reduce a nation's economic well~being.2 This article surveys the theory, evidence and nationale concen-ning protectionist trade policies. The first section illustrates the gains from fm-ce tn-ade using the concept of compan-ative advantage. Recent dem'elopments in international trade theorm' that emphasize other reasons for-gains from trade are also reviewed. The theoretical discussion is followed hiy an examination of recent empirical studies that demonstm-ate the large costs of protectionist trade policies. Then, the rationale for restricting trade is presented. The concluding section summarizes the paper's main arguments. Cletus C. Coughlin is a senior economist at the Federal Reserve Bank of St Louis. K. Alec Chnystal is the National Westminster Bank Professor ofPersonal Finance at We use his example inm'olm'ing tn-ade between England and Portugal to demonstnate how both countries can gain fn-om tnade.. The two countnies pn-oduce the same two goods, wine and cloth, and the only pn-oduction costs an'e labor-costs. The figures below list the amount of lahior leg.. won-ker-daysi requin-ed in each country to pn-oduce one bottle (if wnne on-one hiolt of cloth. England Portugal Wine 3 1 Cloth
Trade Policy of a Free Society
This paper examines the various arguments that have been put forth in favor of protectionism, from both an accounting and philosophical perspective. The author concludes that arguments against free trade are based on faulty premises, illogical reasoning or incorrect facts. Part 2.
THE ILLUSION OF FREE TRADE: FREE IS NOT ALWAYS FAIR
2019
According to Ricardo's (1817) perspective concerning comparative advantage, people would be better off if they specialize in one thing. After the World War II, many provocations concerning economic liberalization to create free world trade. Pros and cons surrounding free trade arouse. Some say that free trade is fair, but there are others who don"t agree. This essay is meant to explain the advantage and the disadvantage of free trade from developing country"s point of view. Our results show that free trade tends to be unfair because there happened to be spatial concentration in advanced countries. In this matter, we use qualitative method to prove that the illusion of free trade is true. The samples that we use for developed countries are Japan, USA, and EU. On the other side, we use South East Asian countries and Latin America as samples. We hope that there will be renegotiation in free trade agreements to create new balance and equality among countries.
Deconstructing the Mythology of Free Trade: Critical Reflections on Comparative Advantage
The theory of comparative advantage serves as the theoretical justification for the neoliberal economic reforms promoted by the International Monetary Fund, the World Bank, and multilateral and regional free trade agreements. This article employs insights from both neoclassical and heterodox economics in order to critique the theory of comparative advantage as applied to the agricultural sector. In particular, the article takes aim at the illusory notion that eliminating distortions in international agricultural trade caused by the lavish agricultural subsidies of wealthy nations will be sufficient to “level the playing field” and promote prosperity in both developed and developing countries. The article argues that trade liberalization in wealthy countries is necessary in order to address inequities in the global trading system that maintain the subordinate status of the global South. However, only an asymmetrical set of rules requiring market openness in wealthy nations and permitting protectionism in poor nations can truly enable developing countries to diversify and industrialize their economies. The article concludes with several recommendations designed to advance the interests of the global South in the Doha Round of WTO negotiations. In addition, the article discusses the unique, multifunctional role of agricultural production in meeting basic human rights (including the fundamental right to food) and in protecting biodiversity, and argues that these concerns must be central rather than peripheral considerations in the Doha Round of WTO negotiations.