The free trade–fair trade fault-lines in historical context

Abstract

Chapter 1 provides an historical context for contemporary controversies over the boundaries between free-trade and fair trade, sketching the evolution of trading patterns over the course of human history and the dramatic expansion in international trade over the past two centuries or so, precipitated initially by the Industrial Revolution and the invention of the steam engine which greatly reduced transportation costs, and much more recently by the communications revolution that has dramatically reduced the cost of transmitting information and ideas across countries. The chapter also briefly reviews the evolution of international trade theory, which emphasizes the gains from specialization, which in turn are limited only by the extent of the market, but suffers from the defect of being static in nature and insensitive to historical factors that may have shaped a country’s contemporary comparative advantage and how a country might re-shape its comparative advantage going forward.