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Principles of Economics- Mankiw (5th) 189

Principles of Economics- Mankiw (5th) 189 - CHAPTER 9 A P P...

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CHAPTER 9 APPLICATION: INTERNATIONAL TRADE 195 CASE STUDY TRADE AGREEMENTS A country can take one of two approaches to achieving free trade. It can take a unilateral approach and remove its trade restrictions on its own. This is the ap- proach that Great Britain took in the nineteenth century and that Chile and South Korea have taken in recent years. Alternatively, a country can take a mul- tilateral approach and reduce its trade restrictions while other countries do the THE UNFAIR-COMPETITION ARGUMENT A common argument is that free trade is desirable only if all countries play by the same rules. If firms in different countries are subject to different laws and regu- lations, then it is unfair (the argument goes) to expect the firms to compete in the international marketplace. For instance, suppose that the government of Neigh- borland subsidizes its steel industry by giving steel companies large tax breaks.
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