The Blank Agreement Ended Many Trade Barriers

The current world economy does not highlight a single better result achieved through international competition in which each country serves the best interests of the world by producing precisely the goods it is obviously the most efficient to produce. On the contrary, there are many possible outcomes that depend on what countries actually do, on the skills, natural or man-made, that actually develop them. [25] While there are many areas in which government policy can generate comparative advantages, there are still many areas in which the classic assumptions of intrinsic comparative advantage are still valid. What matters is whether the sector is subject to constant or rising costs such as wheat or falling costs, such as cars, planes or semiconductors. In economic theory, the cost of all factors of production that could cross borders would entail equal costs in all countries of trade if the factors of production were fully mobile. This would mean that the comparative advantage base for trade between countries would diminish and that ultimately there would be less international trade. Another important concept in international trade theory is the concept of „terms of trade“. This is about the amount of exports needed to get a certain amount of imports, the less exports are needed, the better it is for the country. The terms of trade can shift, either in favour of a country or in favour of its well-being. Many economists argue that a neo-omercantilist strategy may be successful for some time, but that such a strategy will not be effective over time. In principle, this argument is that the complexity is too great for governments in choosing potential winners and in identifying how these sectors can be encouraged. For example, until the mid-1990s, Japan enjoyed great success with its neo-centrist strategy.

However, since then, the Japanese economy has stagnated and many economists believe that Japan needs to change its approach to boost domestic demand instead of focusing on export markets. . . .

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Christoph