Strategic Trade Policy Versus Free Trade

Abstract

Aim of this paper is to illustrate the objects and relation between strategic trade policy and free trade by giving some theoretical results on the international trade. I will try to explain why economists for free trade start to defend some protectionist steps for some industries and why some countries protect their important industries to gain more, although they are members of GATT and WTO.There are a lot of theoretical and empirical studies on the possibility that strategic trade policies can enable firms to increase their share of rents from oligopolistic international markets. The theoretical strategic trade literature makes clear that this is a controversial result. Despite these concerns, the empirical literature continues to grow.In the same time, the attempts to liberalize the trade between nations are still growing. General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO) is one of the most cited examples of a successful international institution to liberalize international trade. But even if the WTO annual reports and website are analyzed, someone easily understand that GATT and WTO still have problems on applying free trade and telling itself to countries and individual whether GATT and WTO are for free trade or not. There are ten misunderstanding on the WTO website about WTO, most important of them is “commercial interest takes priority over development, WTO ignores development and WTO acts blindly for free trade”.