Answer:

By William Krist

Economists have had an enormous impact on trade policy, and they provide a strong rationale for free trade and for removal of trade barriers. Although the objective of a trade agreement is to liberalize trade, the actual provisions are heavily shaped by domestic and international political realities. The world has changed enormously from the time when David Ricardo proposed the law of comparative advantage, and in recent decades economists have modified their theories to account for trade in factors of production, such as capital and labor, the growth of supply chains that today dominate much of world trade, and the success of neomercantilist countries in achieving rapid growth.

Almost all Western economists today believe in the desirability of free trade, and this is the philosophy advocated by international institutions such as the World BANK, the International Monetary Fund, and the World Trade Organization (WTO). And this was the view after World War II, when Western leaders launched the General Agreement on Tariffs and Trade (GATT) in 1947.

However, economic theory has evolved substantially since the time of Adam Smith, and it has evolved rapidly since the GATT was founded. To understand U.S. trade agreements and how they should proceed in the future, it is important to review economic theory and see how it has evolved and where it is today.

In the seventeenth and eighteenth centuries, the predominant thinking was that a SUCCESSFUL NATION should export more than it imports and that the trade surplus should be used to expand the nation’s treasure, primarily GOLD and silver. This would allow the country to have a BIGGER and more powerful army and navy and more colonies.