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Free Trade March 2, 2006

Posted by procopius in Economics.
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Kash from Angry Bear has a informative post on the relationship between free trade and growth. If your like me and interested in economics, but know next to nothing about it, stuff like this rocks.

Some quotes:

In the past few years several different papers, using different methodologies, have concluded much the same thing: more exposure to international trade may cause faster economic growth and development, but does not always and necessarily do so, and the determinants of whether trade is good or bad for growth are institutions and other economic policies.

Put simply, this means that if a country is getting other sorts of economic policies basically right, and has a reasonably well-functioning government, then trade can enhance growth and development, and will raise the quality of life for many more people than it harms. But if a country only liberalizes trade without getting the rest of its house in order, more exposure to international trade by itself could make many more people worse off than it makes better off. (Important reminder: international trade, as with most economic transactions, generates some winners and some losers; what we’re interested in is which group is bigger, and how strongly affected they are.)

And

while there’s only a gradually emerging agreement that trade can be good for growth under the right circumstances, there’s near unanimous agreement that protectionism (or the lack of trade) never helps growth.

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