Why study International Trade?

Trade theory helps address many pressing issues:

  1. Why do countries trade with each other and what determines what is being traded?
  2. Across countries: do all countries gain from trading or does trade perpetuate global inequalities?
  3. Within the same country: how does trade affect the distribution of income among different groups?
  4. In terms of trade policy
    – Can we explain why some sectors tend to receive more protection than others?
    – Is it best to retaliate against countries that impose unilateral tariffs?
    – What are trade blocks? What are the effects on the welfare of their members and the rest of the world?
  5. Other issues
    – Does international trade undermine the protection of the environment?
    – Ethical considerations like: is trade fair with poor countries? Does trade foster the exploitation of children in poorer countries?

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