P/E/13. International Trade and Finance. Assess the case for and against Protection

Conclusion
In conclusion we have seen that protectionist policies are controversial as they can lead to lower welfare in the long run whilst trying to improve terms of trade. A clear example of free trade being better is the case of Canada , whose welfare is 8.6% better off than it was before the NAFTA agreement. There are larger gains to be materialised through trade liberalisation and not protection. Krugman argues „There is still a good case for free trade, and as a useful target in the practical world of politicsŽ. Taxes on goods can lead to adverse effects, especially for the poor, so it is better to aim for the goal of free trade. With technological advancements and free mobility of financial capital, globalisation of the world economy has led to an increase of ©freer trade, and an increase of GNP. Unfortunately Pareto optimality is very difficult to attain, as such there are many theoretical grounds for intervention, but the majority of times the welfare will be lower under intervention.