The Evolution of Trade Policy

Abstract

THE ISSUES Chapter 9 reviewed some of the well-known arguments for restricting trade and showed why trade restrictions are inefficient policy instruments. It is often easier, however, to mobilize political support for trade restrictions than for more efficient policy instruments. There have been remarkable reductions in trade barriers since World War II, but the process of trade liberalization has encountered strong political resistance, and the opponents of liberalization have succeeded at times in halting or reversing the process. This chapter examines the long-term evolution of trade policy and deals with three issues: How trade theory has influenced trade policy. How the influence of trade theory has varied from time to time and place to place. How trade liberalization has been organized and what it has achieved. The next chapter will focus on recent developments, including attempts to broaden trade liberalization by extending it from goods to services and attempts to deepen it by forming regional trading blocs. TARIFF THEORY AND TARIFF HISTORY At one time or another, every argument for tariffs has been invoked in debates about trade policy. Tariff history is also the history of tariff theory and thus shows how theory can influence policy. Divergent Trends: 1816–1860 During the first half of the nineteenth century, trade policy in the United States was dominated by the infant-industry argument , and tariffs rose more or less steadily. Trade policy in Great Britain was dominated by distributional arguments, and tariffs were reduced dramatically.