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Date: | Fri Mar 31 17:18:35 2006 |
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----------------- HES POSTING -----------------
Prof. Rosser is quite right: the UK benefitted dramatically from supporting
free trade. It had the high value added activities, and need to import much
raw material. It clearly enhanced its own competitive advantage to switch
to free trade--and encourage others to do the same. The research of
Williamson and O'Rourke showed that the most protected economies in the
second half of the nineteenth century enjoyed the highest growth.
The case for free trade is hardly clear cut, either empirically or
theoretically. After all, Ricardian comparative advantage produces only a
one-off improvement; it does not give rise to what Brad Andrew as aptly
named Myrdal-Porter growth--a self-reenforcing cycle of innovation and
productivity growth. The ready issue is what environment engenders the
highest rates of innovation and thus real growth--the Schumpeterian
challenge. As one might expect, what works best depends on the context,
e.g. the relative competitive position, nature of markets, quality of legal
system, etc. In some contexts free trade is indeed the best approach, but
not always and everywhere.
Fred Carstensen
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