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Does World Trade Expand Through
GATT Agreements?
There
is almost total consensus among economists that liberalization of
world trade provides countries an opportunity to better themselves
by specializing in the production of goods and services that they
can produce relatively cheaply and in which they have a comparative
advantage.
Professor
Paul Krugman of Massachusetts Institute of Technology writes:
"One of the things that almost all economists agree on is the
desirability of free trade: Adam Smith said it; David Ricardo
provided its mathematical justification; and ever since, every
economist emphatically describes it." Or, as the Nobel laureate
Paul Samuelson puts it: "The concept of comparative advantage
that underlines the economist's case for free trade is one of the
few ideas in economics that is both important and right without
being obvious."
Trade liberalization and improvement, and rectification of trade
distorting measures would raise the efficiency of the world economy
and in turn elevate living standards in the trading nations.
Studies
conducted independently by the World Bank and the Organization for
Economic Cooperation and Development estimate, respectively, that
the accord will bring about an overall increase in yearly global
output of about $213 billion and $274 billion. Undoubtedly, tariff
reduction, the elimination of nontariff and other trade distorting
measures, and the like will result in increased world growth and
trade.
However, the pertinent questions that arise are these: Do all
of the nations reap the benefits, or only some? Are some nations
better off at the expense of others? The rest of the paper focusses
on the agreement from this angle.
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