Traditional Security Was the Concern of Statesmen and Commentators but in Todays World Welfare Values Are of Increasing Importance

I. Introduction and General Topics

Module 2

International Trade:

Some Basic Theories and Concepts

José María Caballero, Maria Grazia Quieti and Materne Maetz

Policy Assistance Division |

PURPOSE

This module provides an introduction to some of the theoretical concepts and arguments used in the discussion of trade policy. The concepts and arguments presented in the module refer to trade in general, but they are illustrated as much as possible with examples from the agricultural sector and their usefulness to examine agricultural trade is highlighted.

CONTENTS

2.1 The economic gains from trade

2.2 Trade and equity

2.3 Protection vs. free trade: arguments and debate

2.4 Regional trading blocs

2.5 Recent public opinion concerns on international trade

KEY POINTS

* Trade can bring benefits by allowing countries to exploit their comparative advantage, reap the benefits of scale economies and ensure competition, greater variety and, potentially, more stable markets and prices.

* The gains from trade are not likely to be evenly distributed, either within or between countries, thus explaining opposition to free trade policies by some parties.

* The political decision is rarely either to trade or not to trade, but whether to impose barriers to trade. Arguments for protection can be made on either economic or non-economic grounds, including food security. However, trade measures are usually neither the most direct nor the most efficient measures to use to achieve these objectives.

* Trade liberalization can take place either within a multilateral or regional framework. Regional trade arrangements are increasingly prevalent, although the role of agriculture in these arrangements is often problematic.

* The trade policy agenda increasingly reflects new concerns raised by consumer and NGO groups in the OECD countries rather than the traditional concerns of declining terms of trade and unequal exchange raised by developing countries....