Trade theory helps address many pressing issues:
- Why do countries trade with each other and what determines what is being traded?
- Across countries: do all countries gain from trading or does trade perpetuate global inequalities?
- Within the same country: how does trade affect the distribution of income among different groups?
- 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?
- 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?