Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Free trade: Free trade is a commercial policy allowing goods and services to flow between countries without significant government interference. It promotes open markets by reducing tariffs, quotas, and other barriers, facilitating international commerce. Free trade aims to boost economic growth, foster competition, and provide consumers with a wider variety of goods at potentially lower prices by encouraging global exchange. See also Trade, International relations, Taxation, Fiscal policy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
IMF Working Papers on Free Trade - Dictionary of Arguments
Ostry I 3 Tariffs/Free trade/Furceri/Hannan/Ostry/Rose: More than on any other issue, there is agreement amongst economists that international trade should be free.(1) This view dates back to (at least) Adam Smith and is supported by much reasoning. In general, economists believe that freely-functioning markets best allocate resources, at least absent some distortion, externality or other market failure; competitive markets tend to maximize output by directing resources to their most productive uses. >Market failure, >Markets, >Free markets, >Trade, >International trade, >Competition. Of course, there are market imperfections, but tariffs - taxes on imports - are almost never the optimal solution to such problems. Tariffs encourage the deflection of trade to inefficient producers, and smuggling to evade tariffs; such distortions reduce welfare. >Welfare, >Imperfect competition, cf. >Perfect competition. Consumption: Further, consumers lose more from a tariff than producers gain, so there is “deadweight loss”. The redistributions associated with tariffs tend to create vested interests, so harms tend to persist. Broad-based protectionism can also provoke retaliation which adds further costs in other markets. All these losses to output are exacerbated if inputs are protected, since this adds to production costs. >Production, >Production costs, >Protectionism, >Consumption, >Market Imperfections. Ostry I 4 (…) there are strong theoretical reasons that economists abhor the use of protectionism as a macroeconomic policy; for instance, the broad imposition of tariffs may lead to offsetting changes in exchange rates (Dornbusch, 1974(2); Edwards, 1989(3)). And while the imposition of a tariff could reduce the flow of imports, it is unlikely to change the trade balance unless it fundamentally alters the balance of saving and investment. Further, economists think that protectionist policies helped precipitate the collapse of international trade in the early 1930s, and this trade shrinkage was a plausible seed of World War II. So, while protectionism has not been much used in practice as a macroeconomic policy (especially in advanced countries), most economists also agree that it should not be used as a macroeconomic policy. Times change. Some economies have recently begun to use commercial policy, seemingly for macroeconomic objectives. So it seems an appropriate time to study what, if any, the macroeconomic consequences of tariffs have actually been in practice. Most of the predisposition of the economics profession against protectionism is based on evidence that is either a) theoretical, b) micro, or c) aggregate and dated. 1. For example, see the survey on free trade in Initiative on Global Markets (University of Chicago Booth School of Business): http://www.igmchicago.org/surveys/free-trade. 2. Dornbusch, Rudiger, 1974, “Tariffs and Nontraded Goods,” Journal of International Economics, vol. 4(2), pp. 177-85. 3. Edwards, Sebastian, 1989, Real Exchange Rates, Devaluation, and Adjustment (Cambridge, Massachusetts: MIT Press). - - - Rieth I 3 Free trade/Boer/Rieth: (…) we estimate* and compare the macroeconomic effects of the many shifts in US trade policy since the 1960s. Historical decompositions show that the Nixon and Ford tariff shocks in 1971 and 1975 left only small and short scars on GDP. Against this, the swing from protection in the 1980s (vis-`a-vis Japan) to free trade in the 1990s (NAFTA, GATT/WTO) had large and long-lasting positive effects: quarterly output-to-trend increased by 1-3 log points for twenty years. The modest cost was a widening of the trade deficit by 0.5 percentage points of GDP per quarter over this period. 2016 reversed the swing. Protectionism: We find that the return to protectionism narrowed the trade deficit at the expense of depressing GDP. The estimated output costs for 2018/19 are 2%. Going forward, a structural scenario analysis suggests that reducing tariffs and uncertainty to their pre-2016 levels would unlock a cumulative output gain of 4% over three years. Overall, the results imply that the gains of stable free trade relations can be higher than suggested by partial equilibrium or static general equilibrium trade models once the dynamic general equilibrium effects are accounted for. >Trade models, >Economic models, >Free market. Rieth I 4 Trade policy: Moreover, the disaggregated results indicate that the capability of trade policy to reallocate economic activity or employment across sectors or space within a country is limited. Tariffs: Finally, the findings also inform policy makers and researcher that they need to be more concerned about the level of tariffs than about the uncertainty surrounding these. >Market uncertainty, >Tariffs, >Trade policy, >Tariff history, >Economic uncertainty. * Lukas Boer and Malte Rieth (2024). The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty. IMF Working Paper 24/13. International Monetary Fund._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
IMF Working Papers Ostry I Jonathan D. Ostry Davide Furceri Andrew K. Rose, Macroeconomic Consequences of Tariffs. IMF Working Paper. WP/19/9.International Monetary Fund. Washington, D.C. 2019 Rieth I Malte Rieth Lukas Boer The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty. IMF Working Paper 24/13. International Monetary Fund. Washington, D.C. 2024 |
||
> Counter arguments against IMF Working Papers
> Counter arguments in relation to Free Trade
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
