Influencing the terms of trade optimal tariff policy

2.1.1 The monopoly model in neoclassical trade theory When Mill wrote his Essays on Some Unsettled Questions of Political Economy in 1844 and four years later his Principles of Political Economy, economic science had not yet been enriched by the neoclassical model world of perfect competition. Hence Mill's analysis ignored the theoretical possibility that all countries are so small that when determining their trade optimum, they must regard the terms of trade for their imports and exports as...

Dumping and antidumping measures

In the most general terms, dumping can be defined as a strategy according to which a foreign entrepreneur offers and sells goods in the domestic country at an excessively low price, however the latter may be defined.17 The difficulties start when we try to specify concretely - first in principle and second for the particular case - what price is to be regarded as too low.18 If dumping is taking place, then, according to a broad spectrum of opinion, the domestic state is justified in resorting...

Special problems of neoclassical trade theory

Bhagwati (1971). 2 There is a large number of studies on this issue. Each and every change in the axioms, however small, allows the construction of a new model with new results. The discussion that follows is limited to the main lines of argument, and does not go into a description of the innumerable ramifications. This also implies that we concentrate on the protectionist price instruments that have dominated trade theory and still continue to do so -namely...

Classical and neoclassical free trade theory

1 This includes inter alia William Stafford (1581 1876), Edward Misselden (1623 1971), Thomas Mun (1664 1895 written around 1630), Josiah Child (1668 1693, pp. 135-164) and James Steuart (1767 1966 1767a 1966). The term 'mercantilism' goes back to Adam Smith (1776 1789 1904, IV i pp. 396-417). 2 A perspective that also advocated trade to a limited degree had been put forward in 1690 by Nicholas Barbon (1690 1905), although in other ways, he remained a supporter of the mercantilist tradition....

Does neoclassical trade theory provide a justification for

1.1 The origins of the concept of free trade 15 1.2 Classical free trade theory 16 1.2.1 The theorem of comparative costs 16 1.2.2 The influence of the demand for goods 16 1.3 The standard model of neoclassical free trade theory 17 1.3.1 The neoclassical critique of classical trade theory 17 1.3.2 The basic idea of the opportunity cost approach 18 1.3.3 The assumptions of neoclassical free trade theory 19 1.3.4 Welfare optimum in the closed economy 19 1.3.5 Global welfare optimum in the case of...

Trade restrictions for the opening up of foreign markets aggressive unilateralism

According to the concept of aggressive unilateralism,1 the state may avail itself of trade restrictions in order to open up to domestic export industries those foreign markets that are shielded by protectionist measures, and grant subsidies to the domestic export industries in order to make the subsidizing of foreign competitors unattractive, and thus to contain them or even bring about the subsidies' repeal. It is hardly surprising that such demands are made, time and again, by industry...