Has free trade theory failed? A critical review of the theory of trade agreements
DOI:
https://doi.org/10.24201/fi.v62i3.2633Keywords:
free trade theories, customs unions, rules of origin, compensation, market failuresAbstract
One of the fundamental propositions of the theory of international trade is the hypothesis that free trade is profitable. This hypothesis underlay many of the trade liberalization movements that took place at the end of the twentieth century. After undertaking a critical review of the requirements for this free trade hypothesis to be valid, this article concludes that, in order to secure the expected gains of trade liberalization, it needs to be accompanied
by a very sophisticated public policy effort, one that is hard for governments to achieve. However, the policies of trade adjustment and correction of market failures can help to partially compensate those negatively affected by trade, and aid in realizing the efficiency gains it offers.
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