Free Trade, Economic Integration and Nationhood

Abstract

The ability to achieve 'national economic targets, including such considerations as the amount of redistribution of product by means of the central government actions, the establishment of time preference in terms of resource exploitation and other collective decisions, is de fined as nationhood. The effect of increasing degrees of international economic involvement are considered in terms of their costs of nationhood renounced : these costs need to be set against the gains from more efficient resource allocation in determining the desired degree of international economic involvement or integration. The arguments for free trade and economic integration are set out purely in terms of economic efficiency (better global resource allocation and particularly so in the pres ence of substantial economies of scale) and pay no heed to any aspects of life which cannot be resolved efficiently by a system of (static) competitive decentralized markets. Free trade eliminates barriers to the exchange of goods (and, potentially, to services) while economic integration eliminates boundaries as impediments to a broader range of economic activities including international movement of factors of production.1 In a world in which some concept of national character or identity exists (i.e. there is a distinctive set of collective values with respect to economic policies which enter into