MIR Meets: Patrick Low

So textbooks will talk about the gains and possible losses from trade.

The gains of efficiency increases in efficiency because of specialization on the basis of what you're better at as an economy.

This has the effect of increasing the size of the economic power.

And also it allows you to take advantage of what we call economies of scale, which is that you use all the resources that go into production to the maximum extent possible.

Also, you get the gains from specialization.

And There is, in all probability, because you're in international markets now, you'll have increased competition.

So you'll have competitive pressures, which will make sure that you do what you're best at.

There'll be some innovation advantages for many economies, maybe access to new technologies.

And the likelihood that you'll have more competition in the domestic economy, which will also enhance efficiency.

So those are the benefits that you would normally hear in the classroom from international trade.

But there are also adjustment costs when you open up to trade.

There are costs of learning, there are costs of retraining, there are costs of regional development very often, and there will be costs of infrastructural.

So there are those costs that have to be offset against the putative gains.

And then, of course, we have on the consumer side, potentially increased satisfaction with a greater product variation, more choice, possibility of lower prices.

But there will be winners and losers.

This is something that some trade economists like to overlook because it's a bit inconvenient, but there are winners and losers from this kind of shift of resources and economic activities in an economy as a result of trade.

So, In that case, governments need to recognise this problem and address it.

And many a time, they're not very good at doing that.

So there's always going to be that challenge, that cost of making sure that the benefits, the aggregate benefits from trade are shared in a decent fashion across populations.

And of course, that's never really perfectly the case.

So it's a mixed picture.

But overall, the world is certainly a richer place because of international trade.

And besides that, countries that build up mutual dependency are probably more likely not to fight each other than if they don't have mutual dependency.

So

that would be a quick summary of the sorts of arguments that would be made for saying that trade is net positive.