In a previous article published in Kinh te Sai Gon (*), I discussed the economic theory underpinning the doctrine of comprehensive free trade. Adam Smith and David Ricardo argued that under full free trade, individuals or countries that can produce goods absolutely or relatively more cheaply should specialize in those products and purchase or import other, more expensive goods from elsewhere. The market, they believed, would automatically adjust itself through prices or exchange rates so that labor and resources would be fully utilized, to the benefit of all. Ralf Gomory and William Baumol rejected the theory of comprehensive free trade on theoretical grounds, and earlier John M. Keynes had also rejected it in practice. There is no such thing as automatic self-adjustment. U.S. history and foreign trade policy The United States has gone through three distinct phases of development, each characterized by a different foreign trade policy. (table 1) Period 1 (1820–1870): Trade deficits This period of trade deficits lasted for 50 years after the founding of the nation. From the outset, Alexander Hamilton, one of the founders of the United States and its first Secretary of the Treasury, advocated protecting the domestic market in order to develop industry. In […]
To read more, please click here.
