Academic journal article Review - Federal Reserve Bank of St. Louis

President's Message

Academic journal article Review - Federal Reserve Bank of St. Louis

President's Message

Article excerpt

Almost all economists agree that free trade brings substantial benefits to trading partners. Despite the numerous arguments in defense of protectionist policies, I find nearly all of these arguments to be seriously flawed. Economic theory and empirical analysis demonstrate that the lowering of trade barriers causes increased competitive pressures that allow and, in fact, force resources to be used more productively. These competitive pressures, which are reflected in expanding trade flows, have been a significant factor propelling higher standards of living for countries participating in these crossborder flows.

Adjustments to these competitive pressures are far from costless, however, so they tend to be resisted by some firms and workers. Thus, despite the contribution of free trade to higher living standards, as the argument for free trade moves from the economics arena to the political arena, specific proposals that would lower trade barriers generate large differences of opinion concerning their desirability. Recent events in Seattle confirm vividly the political contentiousness of trade issues. The Twenty-Fourth Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis, held on October 21-22, 1999, focused on the major international trade issues dominating current discussions. …

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