27 Controversies in Trade Policy, Part 1

27 Controversies in Trade Policy, Part 1 - Controversies in...

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1 1 Controversies in Trade Policy • Agenda: – New Arguments for Activist Trade Policy. • Technology and Externalities. • Imperfect Competition and Strategic Trade Policy. 2 Controversies in Trade Policy Introduction: Two major controversies in international trade have arisen in recent years. 1. A new set of arguments for government intervention in trade in advanced countries . 2. A renewed debate on the effects of international trade on workers in developing countries . 3 Controversies in Trade Policy • Introduction: – A new set of arguments for government intervention in trade in advanced countries . • These arguments have focused on high-technology industries and led to a new theory of strategic trade policy . 4 Controversies in Trade Policy • New Arguments for Activist Trade Policy: – An argument for an activist government policy in international trade should be based on offsetting some pre-existing domestic market failure . – One of the problem with market failure arguments for intervention is identifying when they exist.
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2 5 Controversies in Trade Policy New Arguments for Activist Trade Policy: Two kinds of market failures have been identified that seem to be present and relevant to the trade policies of advanced countries . 1. The problem of appropriability in high-technology industries, and 2. The presence of monopoly profits in highly concentrated oligopolistic industries. 6 Arguments for Activist Trade Policy • Technology and Externalities: –There is a potential market failure arising from difficulties of appropriating knowledge. – Where such externalities can be shown to be important, there is a good case for subsidizing the
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27 Controversies in Trade Policy, Part 1 - Controversies in...

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