BA 187 – International Trade. Krugman & Obstfeld, Chapter 9 Political Economy of Trade Policy. The Arguments for Free Trade . Arguments for Free Trade. Efficiency Perspective Reverse of cost/benefit analysis of a tariff. Free trade eliminates deadweight losses associated with tariff.
Krugman & Obstfeld, Chapter 9
Political Economy of Trade Policy
Bilateral = increase tariffs on only other nation’s goods.
Multilateral = increase tariffs on goods of all trading partners.
Source: P. Petri, Modeling Japanese-American Trade, 1984
Source: Hufbauer & Elliot, Measuring Costs of Protection in the U.S., 1994