Chapter 2

Question 1

Frédéric Bastiat

Answer 1

(Pro-Libre-échange)

Frédéric Bastiat was a French economist, writer, and member of the French National Assembly. He was a proponent of classical liberal economic policies and free trade, and is known for his essays and books advocating for these ideas.

One of his most famous works is “Harmonies économiques” (Economic Harmonies), which was published in 1850. In this work, Bastiat argues that free trade and economic cooperation among nations leads to greater prosperity and peace. He also criticizes government intervention in the economy, arguing that it leads to unintended consequences and undermines individual freedom.

“Harmonies économiques” is considered a classic of free-market economic thought and continues to be influential today among advocates of free trade and limited government intervention in the economy.

Question 2

What are some origins/authors of libre-echange?

Answer 2

The historical origins of the idea of free trade, can be traced back to philosophers such as John Locke, David Hume, and Adam Smith, who advocated for the opening of borders to ideas and commerce. In France, authors such as J. Turgot, Condillac, F. Bastiat, and Ch. L. Montesquieu argued against state intervention in commerce, asserting that the state’s only legitimate role is to protect individual liberties.

Question 3

Charles de Montesquieu

Answer 3

(Pro Libre-Echange)
- Montesquieu is most well-known for his book “The Spirit of Laws,” which was published in 1748. “De l’esprit des lois”
- Montesquieu was also a proponent of individual liberty and freedom of thought. He believed that the state had a responsibility to protect the individual rights of its citizens, and that people should have the freedom to express their opinions and beliefs without fear of persecution.
- Charles de Montesquieu argued in favor of the freedom of trade and commerce as a condition for peace between nations.
- He believed that commerce could cure destructive prejudices and promote gentle manners.
- He also argued that the natural effect of commerce is to lead to peace, as two nations that trade together become mutually dependent on each other.
- Montesquieu saw the word “negotiation” (negotium in Latin) as synonymous with the negation of idleness and inactivity, suggesting that commerce promotes dynamism and economic growth

Question 4

Plaidoyers plus récents pour le libre-échange

Answer 4

Yagdish Bhagwati
Paul Samuelson

Question 5

Yagdish Bhagwati

Answer 5

Yagdish Bhagwati argues that free trade not only promotes global economic development but also that opposing it will not better protect social rights and the environment. He believes that protectionist tendencies, particularly in the anti-globalization movement, harm not only the countries that adopt them but also others.

Question 6

Paul Samuelson

Answer 6

Paul Samuelson argues that free trade creates a surplus of global wealth that can be shared. He notes that economists unanimously support free trade, even those who have sought to refine traditional theories of international trade. Even poor countries, with lower productivity than rich countries, have an interest in liberalizing trade. However, Samuelson notes that politicians are often opposed to free trade, setting up a unique divide between economists and policymakers.

Question 7

Argument of Pascal Lamy

Answer 7

Pascal Lamy, a practitioner’s point of view, argues that commerce creates a continuity between underdevelopment and development, as evidenced by the increasing production of developing countries surpassing that of developed countries. He acknowledges that globalization has lifted billions of people out of poverty but also resulted in growing inequalities. Lamy believes that protectionism and economic patriotism are no longer relevant and points out that the proportion of imported components in exported products has increased from 20% to 40%, and will continue to rise, making the idea of consuming and exporting only national products obsolete.

Question 8

Arguments J.B Colbert and Maurice Allais

Answer 8

(Anti-Libre échange)
“Trade is a war of money” and “commerce is another way of waging war”
The economic system of Colbertism is based on the principles of mercantilism, whose objective is to allow the state to assert its rank.
The mercantilist doctrine justifies prohibitive practices, including the ban on imports of foreign finished products.
Globalization penalizes rich countries
Competition between unequal countries can be negative for developed countries, due to differences in wage levels and social protection.

Question 9

Dani Rodrik

Answer 9

Anti- Libre échange

In “What do Trade Agreements Really do,” Dani Rodrik argues that the benefits of free trade are exaggerated. The idea of comparative advantage assumes that all countries play by the same rules, which is no longer the case. Liberalizing trade is also supposed to stimulate exports and create wealth and jobs, but only some countries are successful in doing so, leading to winners and losers. Trade agreements may create jobs in some countries but destroy them in others. Overall, free trade is only efficient if trade grows significantly and evenly, which is a challenging assumption in reality.

Question 10

Samir Amin

Answer 10

Anti- Libre échange

Samir Amin argues that colonialism and capitalism are fundamentally inseparable, and that free trade is used as an instrument to exploit and pillage developing nations.

He characterizes the World Trade Organization (WTO) as a club of multinational corporations for the pillage of the third world, which protects the industrial and intellectual property rights of imperialist capitalist countries while establishing a false symmetry in market access that allows the exploitation of southern resources without giving these countries access to northern markets.

Amin calls this a global apartheid and a continuation of the colonial system.

Question 11

Dix thèse favorable à la libéralisation des échanges

Answer 11

L.A.B.C.C.E.M.P.G.

“Labc-cem-pig”

Le libre échange accroît l’efficacité de la production
Le libre échange améliore le bien être
Le libre échange bénéficie aux consommateurs
Le libre échange corrige les inégalités internationales
Le libre échange égalise les conditions de développement
Le libre échange favorise la modernisation du pays entier
Le libre échange sert l’intérêt général
Le libre échange assure la paix sociale
Le libre échange garantit une meilleure protection de l’environnement
Le libre échange est la politique commerciale la moins risquée

Question 12

Le libre échange accroît l’efficacité de la production

Answer 12

free trade leads to an increase in production efficiency. It encourages each country to specialize in the industries in which they are relatively more productive and abandon those in which they are less efficient. As a result, there is a more efficient allocation of resources, leading to greater overall economic efficiency. (Comparative Advantage)

Question 13

Comparative Advantage

Answer 13

Comparative advantage is a concept in economics that describes the ability of a country, company, or individual to produce a particular good or service at a lower opportunity cost than others. It means that a country should specialize in producing the goods or services it can produce at a lower opportunity cost, and trade with other countries for goods or services that they can produce at a lower opportunity cost. This allows for increased efficiency and production, and overall economic benefits for all parties involved

Question 14

Le libre échange améliore le bien être

Answer 14

free trade improves well-being by supporting economic growth and generating distributable surplus wealth. This is achieved through a mechanism whereby more trade leads to more division of labor, increased productivity, greater growth, more jobs, and higher incomes in the countries that engage in free trade.

Le libre échange soutient la croissance, et permet de dégager un surplus de richesses distribuables (gain from trade)
Le libre échange accroît le bien être dans les pays qui s’y engagent en vertu du mécanisme: plus de commerce -> plus de division du travail -> plus d’efficacité productive -> plus de croissance -> plus d’emplois et de revenus

Question 15

Le libre échange bénéficie aux consommateurs

Answer 15

The free trade benefits consumers by increasing competition, leading to a greater variety and quality of goods available at lower prices. While it may harm certain businesses and sectors, these losses are generally offset by gains in other sectors and for consumers

Question 16

Maquiladoras in Mexico

Answer 16

Maquiladoras are factories in Mexico that produce goods for export to the United States and other countries. They operate under a special program that allows them to import raw materials and equipment duty-free as long as the finished products are exported. The program was established in the 1960s as a way to promote economic development in Mexico and create jobs for its growing population.

Maquiladoras have been successful in creating jobs and generating income for Mexico, particularly in the border regions where they are concentrated. They have also been criticized for their low wages, poor working conditions, and environmental pollution.

However, from the perspective of the benefits to consumers, the Maquiladoras offer a good example of how free trade can benefit consumers. By allowing companies to move production to areas where labor and other costs are lower, free trade can result in lower prices for consumers. In the case of the Maquiladoras, they are able to produce goods at a lower cost than in the United States, and these cost savings are passed on to American consumers who purchase the finished products. This is one way in which free trade can benefit not only the producers but also the consumers who purchase their products.

Question 17

Le libre échange corrige les inégalités internationales

Answer 17

The principle of free trade corrects international inequalities. The distribution of gains tends to favor the poorer countries, while the richer ones receive a smaller gain due to their higher demand which increases the price of imported goods. The free trade principle is thus effective and has corrective effects.

Question 18

Paradoxe de J Stuart Mill

Answer 18

The “paradoxe de J Stuart Mill” refers to the observation made by the 19th century economist John Stuart Mill that the gains from trade tend to benefit the poorer nations more than the wealthier ones. This is paradoxical because one would expect that the wealthier nations, with their greater resources and more advanced technologies, would be the ones to benefit the most from trade. However, Mill argued that the opposite was true, since the wealthier nations tended to have a greater demand for imported goods, which drove up their prices and reduced the gains from trade.

Question 19

Le libre échange égalise les conditions de développement

Answer 19

free trade equalizes development conditions between countries, as demonstrated by the Heckscher-Ohlin-Samuelson theorem. Under the pressure of competition, factor prices become equal worldwide. However, it is also acknowledged that free trade is not a solution to current geographical inequalities, as stated by P. Samuelson in 1949.

Question 20

The Heckscher-Ohlin-Samuelson theorem

Answer 20

The Heckscher-Ohlin-Samuelson theorem (HOS theorem) is an economic theory that explains how countries benefit from trading goods and services with each other based on their relative factor endowments, which are the amounts of land, labor, and capital they possess. The theorem states that a country will tend to export goods that use its relatively abundant factor of production and import goods that use its relatively scarce factor of production. For example, a country with an abundance of labor will tend to export labor-intensive goods and import capital-intensive goods. The theorem suggests that free trade can lead to a more efficient allocation of resources and increase the welfare of countries involved in trade.

Question 21

Corn Laws

Answer 21

The Corn Laws were a series of protectionist measures that were enacted in Britain in the early 19th century. They were designed to protect domestic grain producers by imposing high tariffs on imported grain. The laws were supported by wealthy landowners who benefited from the higher prices they were able to charge for their grain. However, the laws were opposed by many other groups, including manufacturers who wanted access to cheaper grain for their workers, and urban workers who were struggling to afford food.

The Corn Laws were a major political issue in Britain in the 19th century. They were widely seen as an unfair and inefficient form of protectionism that benefited a small group of wealthy landowners at the expense of the broader population. The laws were eventually repealed in 1846, in large part due to the efforts of free trade advocates like David Ricardo, who argued that free trade would promote greater efficiency and prosperity for all members of society.

Question 22

Le libre échange favorise la modernisation du pays entier

Answer 22

The free trade promotes modernization of the entire country by opening up markets to international competition and allowing the adoption of new technologies and more efficient production methods. This leads to increased productivity and economic growth, which in turn leads to higher living standards for the population.

Based on the historical context provided, it seems that the “Corn Laws” protectionist policies hindered the modernization of the British economy by limiting competition and innovation in the agricultural sector. Ricardo’s advocacy for free trade and the eventual dismantling of these laws in 1848 allowed for greater competition and innovation in the agricultural sector, leading to increased productivity and economic growth. This example suggests that free trade can promote modernization by facilitating competition and innovation across various sectors of the economy.

Question 23

Le libre échange sert l’intérêt général

Answer 23

The idea behind this argument is that protectionist policies, which restrict imports or exports, benefit particular interests or industries, rather than the general public. For example, tariffs on imported goods can limit competition and artificially raise prices, allowing domestic producers to earn abnormally high profits, which are sometimes called “rents of scarcity.”

In contrast, free trade policies benefit society as a whole by promoting competition, increasing the variety of available goods, and lowering prices for consumers. According to proponents of free trade, this non-discriminatory approach is the most effective way to ensure that the benefits of international trade are shared among all members of society, rather than just a select few.

This argument against protectionism was famously expressed by French economist Frédéric Bastiat in his satirical “Petition of the Candlemakers,” in which he parodied the protectionist demands of French candlemakers by suggesting that they should petition the government to block out the sun so that people would have to rely on artificial light sources like candles. The absurdity of this proposal underscores the idea that protectionism can serve narrow interests at the expense of the broader public.

Question 24

Le libre échange assure la paix sociale

Answer 24

When a country experiences a recession or economic downturn, there is often a decrease in overall economic activity and a reduction in the amount of resources available. This can create a situation where different groups within society begin to compete for access to those resources, leading to conflict and social unrest. On the other hand, when an economy is growing and there is a surplus of resources to distribute, it becomes easier to negotiate and find compromises that can satisfy the interests of different groups.

At the international level, the same principles apply. When countries engage in free trade and exchange goods and services, it can lead to economic growth and an increase in overall wealth. This surplus can then be distributed among the different nations, which can help to reduce tensions and promote cooperation. By contrast, if countries engage in protectionism or try to hoard resources for themselves, it can lead to conflict and competition for those resources.

Therefore, free trade can help to ensure a more peaceful and harmonious world by promoting economic growth and a more equitable distribution of resources.

Question 25

Le libre échange garantit une meilleure protection de l’environnement

Answer 25

The argument that free trade guarantees better protection of the environment is based on the Grossman-Krueger model. The model suggests that poverty, rather than prosperity, poses a threat to the environment as it creates strong pressures on the planet’s resources. The model is supported by the Environmental Kuznets Curve (EKC), which shows that environmental degradation initially increases as countries industrialize, but then decreases as their economies become more developed and they have the resources to invest in environmental protection. Free trade is seen as promoting economic growth, which in turn can lead to environmental protection as countries become wealthier and have the resources to invest in technologies and policies to protect the environment.

Question 26

The Grossman-Krueger model

Answer 26

The Grossman-Krueger model is an economic model that suggests that free trade can lead to better environmental protection. The model argues that as a country’s economy grows through trade and investment, it will increase its demand for clean air, water, and other environmental amenities. This demand will in turn create incentives for businesses to invest in clean technologies and practices to meet that demand, ultimately leading to better environmental outcomes.

The model also suggests that countries with weak environmental regulations and poor enforcement mechanisms may experience a race-to-the-bottom effect in which they compete to attract foreign investment by offering lower environmental standards. However, this effect can be mitigated by including environmental protections in trade agreements and by encouraging countries to adopt and enforce strong environmental regulations.

Question 27

Le libre échange est la politique commerciale la moins risquée

Answer 27

Paul Krugman argues that free trade is the least risky trade policy that can be implemented. Protectionism, on the other hand, involves risks that are difficult to identify and anticipate. The risks of protectionism include targeting the wrong industries to protect, providing aid to certain sectors at the expense of others, triggering retaliatory measures from trading partners, and ultimately leading to a costly trade war. Therefore, Krugman believes that free trade is the best option for minimizing these risks and ensuring stable trade relations between countries.

Question 28

Paul Krugman

Answer 28

Paul Krugman is an American economist who is a professor of economics and international affairs at Princeton University. He is also a columnist for The New York Times and a recipient of the Nobel Memorial Prize in Economic Sciences in 2008. Krugman is known for his research on international trade and finance, and his work on New Trade Theory and New Economic Geography has contributed significantly to the understanding of the patterns of trade between countries and the spatial distribution of economic activity. He is also a vocal advocate of free trade and a critic of protectionism, arguing that the benefits of trade liberalization outweigh the costs, and that protectionist measures often have unintended consequences that harm both domestic and foreign economies.

Question 29

Dix Thèses favorable au protectionnisme

Answer 29

Le libre échange est l’antichambre des guerres commerciales
La protection sert les intérêts nationaux
La protection est d’autant plus efficace que le pays est de grande taille de
L’argument des « industries dans l’enfance »
L’argument des « industries vieillissantes »
Le « paradoxe de West Graham »
Les disparités des systèmes sociaux peuvent coûter cher aux pays avancés
L’argument de la politique commerciale stratégique
L’argument du « Managed Trade » (commerce administré)
L’argument de la protection de l’environnement

Question 30

Le libre échange est l’antichambre des guerres commerciales

Answer 30

When countries engage in free trade, they open up their markets to foreign competition. This can lead to the displacement of domestic industries and workers as they struggle to compete with cheaper imports. In turn, this can create economic and social tensions within a country, which may lead to protectionist measures and potentially even trade wars.

Some argue that protectionism serves as a way to protect national industries and promote economic independence, which helps to reduce the risk of conflict between countries. They argue that free trade can lead to a race to the bottom, where countries compete on the basis of lower wages and weaker environmental standards. This can create a situation where workers are exploited and the environment is degraded, which could ultimately lead to social unrest and political instability.

Overall, the argument is that free trade can exacerbate existing economic and social inequalities, and potentially even create new ones. By contrast, protectionism is seen as a way to promote national unity and social stability by ensuring that economic benefits are distributed fairly and that domestic industries and workers are protected from foreign competition.

Question 31

La protection sert les intérêts nationaux

Answer 31

Protectionism serves national interests by promoting exports and/or limiting imports, which stimulates activity in times of crisis and preserves jobs. History shows that alternating between protectionist and liberalization policies corresponds with alternating phases of prosperity and crisis.

This thesis argues that protectionism can serve the national interest by promoting exports and limiting imports, which can be a means to stimulate economic activity and preserve jobs. In times of economic crisis or decline, protecting domestic industries can be a way to provide a boost to the economy and prevent job losses. This idea is based on the belief that the domestic market should be prioritized and that certain industries should be shielded from foreign competition to ensure their survival and growth.

Question 32

La protection est d’autant plus efficace que le pays est de grande taille

Answer 32

The larger the country using protective tariffs, the more effective it can be. When a large country restricts imports through tariffs, it can have a significant impact on the global market. The decrease in demand for imports leads to a decrease in the global price of goods, which benefits the large country that imposed tariffs in two ways: it makes foreign producers pay part of the tariff, and it decreases the cost of the tariff for its own consumers.

Question 33

L’argument des « industries dans l’enfance »

Answer 33

The “infant industries” argument emphasizes the importance of fixed costs and learning effects in industrial activities, which give an advantage to industrially advanced countries. The first entrants acquire an irreversible competitive advantage (first-mover advantage), while latecomers face higher production costs that may prevent their industries from developing. Free trade is therefore likely to accentuate international disparities, against which it is necessary to protect the “infant industries” from foreign competition.

Question 34

L’argument des « industries vieillissantes »

Answer 34

The argument of “aging industries” suggests that protection or government aid can help industries to overcome difficult times, modernize or redeploy. It is not about prolonging the survival of unproductive industries, but about ensuring painful adaptations such as site reconversion and worker reclassification. This type of intervention is particularly relevant today, as the global mobility of companies and capital is increasing and the nationality of firms and identity of national production are being strongly challenged.

Question 35

Le « paradoxe de West Graham »

Answer 35

The West Graham Paradox is a critique of free trade that suggests that under certain circumstances, trade between two countries can result in an overall loss rather than a gain for both countries. The paradox is based on the idea that there are two types of industries: those with decreasing returns to scale (such as agriculture) and those with increasing returns to scale (such as high-tech industries).

If two countries specialize in the industries that they have a comparative advantage in and trade with each other, the country specializing in the decreasing returns industry will experience rising costs as production increases, while the country specializing in the increasing returns industry will see costs decrease as production increases. As a result, the country specializing in the decreasing returns industry may experience a net loss despite gains in the other industry, leading to an overall loss for both countries.

Question 36

Les disparités des systèmes sociaux peuvent coûter cher aux pays avancés

Answer 36

The competition between countries with unequal social systems can be disadvantageous for developed countries due to differences in wage rates and levels of social protection. This led to the proposal to establish social standards within the WTO, such as prohibiting forced labor, setting a minimum age for child labor, and banning the importation of goods produced by prisoners. However, emerging economies see this proposal as a selfish protection of the interests of rich countries under the guise of defending human rights.

Question 37

L’argument de la politique commerciale stratégique

Answer 37

The theory of strategic trade policy (STP) suggests that in industries with significant economies of scale, where R&D and learning effects are important, and where there is oligopolistic competition, free trade may not be optimal. Protection, including export subsidies, can lead to national advantages that outweigh those of free trade. Paul Krugman argued that public assistance received by Airbus had the effect of durably strengthening the strategic position of the European consortium to the detriment of Boeing.

Question 38

L’argument du « Managed Trade » (commerce administré)

Answer 38

The theory of “Managed Trade” was developed by L. d’Andrea Tyson in 1990.

Managed Trade is a trade policy that involves governments managing international trade flows, particularly in high-tech industries, by negotiating and enforcing agreements that limit or control imports and exports. Managed Trade can be seen as an argument for protectionism over free trade because it involves governments intervening in the market to protect certain industries deemed to be strategically important. This protection can take the form of voluntary export restraints, voluntary import expansions, or other forms of trade barriers.

Some proponents of Managed Trade argue that certain industries, particularly high-tech industries, are essential for national security or economic growth and that they require protection from foreign competition to develop and flourish. They argue that without Managed Trade, these industries would be vulnerable to unfair competition from countries with lower labor standards or lax environmental regulations, leading to a decline in domestic production and a loss of high-paying jobs.

Question 39

L’argument de la protection de l’environnement

Answer 39

The expansion of international trade that accompanies free trade increases energy consumption and promotes the intensive use of natural resources. This can lead to migration of polluting activities to countries with lower environmental protection standards and encourage the development of “environmental dumping.” These factors fuel hostility to free trade among anti-globalization movements. However, the impact of free trade on the environment is much more complex than it appears, as seen in the Kuznets Environmental Curve (KEC).

Question 40

Kuznets Environmental Curve (KEC).

Answer 40

The Environmental Kuznets Curve (EKC) is a theoretical model that suggests that environmental degradation increases as an economy develops but then starts to decline as the country becomes more affluent. The curve was named after economist Simon Kuznets, who first proposed a similar theory regarding income inequality and economic growth.

The EKC postulates that in the early stages of economic development, environmental quality deteriorates as countries prioritize economic growth over environmental concerns. However, as countries become wealthier, they can afford to invest in cleaner technologies and practices, leading to a decline in pollution levels.

The curve is often depicted as an inverted U-shaped curve, with pollution levels increasing at first as a country develops, reaching a peak, and then declining as the country becomes more affluent. However, the existence of an EKC is still a topic of debate among economists and environmentalists, and some argue that it is an oversimplified model that does not take into account the complex interactions between economic development and environmental degradation.

Question 41

Pourquoi un durcissement de la politique commerciale des Etats Unis ?

Answer 41

The article discusses the reasons for a potential hardening of US trade policy, citing the decline of the American economy since 1978 and the rise of new economic powers such as the NPI and Germany as major challenges. There is also a resurgence of neo-protectionist sentiment, with economists such as L. Thurow, C. Prestowitz, and P. Kuttner criticizing the blind faith in laissez-faire policies that has contributed to the dismantling of American industry. Some economists, including P. Krugman, P. Samuelson, and A. Blinder, have expressed doubts about the superiority of free trade. Laura d’Andrea Tyson advocates for generalized self-limiting agreements modeled on the Multi-Fiber Arrangements (1974-2005), viewing international trade as a zero-sum game.

Question 42

NPI

Answer 42

“Nouvelles Puissances Industrielles” which translates to “Newly Industrialized Countries” in English

Refers to a group of countries that have undergone rapid industrialization and economic growth over the past few decades. The NPI includes countries such as South Korea, Taiwan, Singapore, and Hong Kong. These countries have experienced significant economic development and are considered to be emerging markets.

Question 43

Fundamental Points of Trumponomics

Answer 43

Trump sought to prioritize domestic economic and financial interests and withdrew from several trade agreements, including the Trans-Pacific Partnership and NAFTA. He also threatened to impose tariffs on imports of cars from Germany and steel from the EU, and encouraged the UK to leave the EU. This has led to concerns about a potential trade war and protectionist measures.

Question 44

When did the UK join the EEC?

Answer 44

1973

Question 45

Has the UK’s share of global trade increased since it joined the EU?

Answer 45

No. The UK joined the European Economic Community in 1973, and its share of global trade declined from 5.1% to 2.1% in 2019

Question 46

Who first suggested the UK should leave Europe?

Answer 46

Jacques Delors

Jacques Delors is a French politician and economist who served as the President of the European Commission from 1985 to 1995. He is known for his contributions to the development of the European Union and was a key figure in shaping the economic policies of the EU during the 1980s and 1990s, including the creation of the single market and the introduction of the euro.

Jacques Delors did not have an official role in Brexit as he retired from politics in 1995. However, in 2011, he made a comment suggesting that the UK was only interested in its economic interests and nothing more, and therefore should leave the EU. His comment was seen by some as prescient given the UK’s eventual decision to leave the EU in 2016.