Free Trade: Old and New Challenges

Abstract

The paper analyses the old and new challenges to the theory and policy of Free Trade. The old challenges have sought to undermine the case for Free Trade by citing one or another type of market imperfection. Thus, the postwar period has seen two such challenges: factor market imperfections were analysed in the 1950S to 197os, product market imperfections in the I980S. The new challenges are twofold. One comes from the demands for Fair Trade as a precondition for Free Trade; the other, from the concern that Free Trade, while efficient, immiserises the unskilled in the richer countries. Having given a Harry Johnson Lecture four years ago in London, I was startled to be invited to give yet another one today. But then I recalled his unmatched productivity: his articles continued to be published even after his death, the pipelines in several journals being full of them. It is only appropriate then that he be honoured many times over. Also, in these days of preoccupation with increasing returns to scale, such a proliferation of lectures in the memory of a great economist is doubly fitting. Since Harry Johnson was in the English tradition of taking his theory from the real world's problems and then taking it back to talk penetratingly about them, I thought it appropriate to address the earlier Johnson Lecture to the threats posed currently to the multilateral trading system by increasing resort