Trade Agreements Are Helpful Because They Allow Countries To

by encouraging countries to balance imports and exports [29] See e.g. B ibid., 54: “The comparative advantage theory assumes that trade is balanced (i.e., trade is balanced (i.e. trade is balanced(i.e. trade). Exports are the same in value) and that the work is full-time . . . If trade is not balanced, the surplus country must export certain products for which it has no “real” comparative advantage.┬áMultilateral trade liberalization, in which all countries reduce their trade barriers at the same time, is the best way to promote trade on the basis of comparative advantages. However, countries can abuse the system by introducing a policy of Thy`s beggar neighbors. One nation could, for example, allow free trade with another nation, with exceptions that prohibit the importation of certain drugs that are not authorized by its regulators, or animals that have not been vaccinated or processed foods that do not meet their standards. The benefits of an economy resulting from increased exports as a trading partner improve market access. If the U.S.

trading partner removes barriers through a trade agreement, U.S. exports are likely to increase, increasing U.S. production and GDP. And suppliers to a company that makes additional sales through exports are likely to increase their sales to that company, which will further increase its GDP. In the 17th and 18th centuries, the prevailing thought was that a prosperous nation should export more than it imports, and that the trade surplus should be used to extend the nation`s treasure, first gold and silver. This would allow the country to have a larger and more powerful army and navy and more colonies. Governments with free trade policies or agreements do not necessarily abandon import and export controls or eliminate all protectionist policies. In modern international trade, few free trade agreements lead to completely free trade. A government does not need to take concrete steps to promote free trade. This upside-down attitude is called “laissez-faire trade” or trade liberalization.

This would indicate that the mercantilists were right, that a nation would be well advised to limit imports.