Elgar original reference
Edited by William A. Kerr and James D. Gaisford
Chapter 1: Introduction to Trade Policy
William A. Kerr The study of international trade by economists can be roughly divided into three general areas of inquiry: (a) trade theory; (b) empirical studies of trade; and (c) trade policy. The former seeks fundamental insights through the rigorous application of structural formalism and tightly speciﬁed assumptions. Empirical studies test the propositions of trade theory (Perdikis and Kerr, 1998) or attempt to garner insights from the statistical evidence pertaining to trade ﬂows and related economic indicators. Trade policy deals with the economic eﬀects of direct or indirect government intervention that alters the environment under which international transactions take place. Work in trade theory is most often undertaken within a general equilibrium context while trade policy, for the most part, is accomplished using partial equilibrium analysis. Trade policy deals with the winners and losers that arise from government intervention in markets. Vested interests are at the heart of trade policy, with government actions viewed as redistributive and open to inﬂuence. It has been the subject of many of the great economic debates of the last two and a half centuries and still provides topics that are hotly contested in the academic, political and civil society arenas. Trade policy has been around since the dawning of economic science. While Adam Smith (1776)1 may have had a number of motivations for writing The Wealth of Nations, there can be little doubt that a central task was to debunk the intellectual respectability of mercantilism – a trade policy prescription that...