The terms of trade argument for a tariff The domestic market failure
National Welfare Arguments Against Free Trade
• The Terms of Trade Argument for a Tariff (import tax)
Key Terms
Theory of the second best 次优理论 General Agreement on Tariffs and Trade(GATT) 关贸总协定 Trade creation 贸易创造 Trade diversion 贸易转移 International negotiation 国际谈判 Trade round 贸易回合 Marginal social benefit 边际社会收益 Trade war 贸易战 Median voter 中点选民 World Trade Organization 世界贸易组织 optimum tariff 最优关税
Fig. 9-1: The Efficiency Case for Free Trade
The Cases for Free Trade (cont.)
• However, because tariff rates are already low for most countries, the estimated benefits of moving to free trade are only a small fraction of national income for most countries.
• Political Argument for Free Trade