Question

1. why is there so much pushback against free trade policies? Why is it that there is so much opposition to trade despite the general agreement of economists that it is beneficial? Discuss the impact of special interests and voter irrationality in determining these outcomes. Do you believe that the Democratic process if efficient in reaching optimal trade policies? Explain why or why not.
2. Describe the balance of payments and what it seeks to measure. Describe the three accounts included and what these measures. Explain how an understanding of the balance of payments helps to have a more complete of exchange that takes between nations rather than focusing on the balance of goods and services. Discuss the relationship between the current account and savings, investment, and government finances. Is the current account in itself the best measure of unsustainable trade imbalances? Explain why or why not.

Answer 1

There is pushback against free trade becasue of the following reasons -

• To protect new firms specially of developing countries against the international competition.It will allow the infant industries to gain experience and realize its comparative advantage.
• As many developing countries trade primary goods dependent on agriculture, there can be fluctuations in price arising due to environmental factors leadng to trade imbalance.
• To stop countries from dumping their goods.

Arguement for trade restrictions are-  to secure the jobs of domestic workers, if goods become availabe at cheaper rates from abroad many workers will lose their job as their products will be less desirable domestically. Trade will give rise to unfair competition among the small scale domestic producers to that of large scale foreign produers.
Social interests and voter irrationality will push the policy makers to go against free trade in order to gain the favors of the interest groups to win next election. Social welfare is ignored in this scenario as the policy makers are interested in fulfilling their political motives only.