POL S 7 Lecture Notes - Lecture 9: Collective Action, Autarky, Dispute Settlement Body
Document Summary
All economic analysis concludes that trade is beneficial. Gap between the ideal and the observed. Trade has distributional consequences and creates different domestic interests. Although every country gains, within each some groups gain and some lose. Trade policy is a function of the relative weight of the winners and losers in national politics, and the institutions that aggregate their interests. International institutions facilitate free trade by changing the structure of domestic interests, solving coordination problems, and enforcing a standard of behavior. Any single country is best off specializing in that good it is comparatively best at producing and exchanging for those goods it is comparatively less adept at producing. Same principle we use in our daily lives. Every country has a comparative advantage; does not depend upon absolute productivity but rather on relative productivity. Law holds even for one country, regardless of whether other countries reciprocate by opening their economies to trade.
