ALTERNATIVE TRADE POLICIES

Provided by Research Papers in Economics

ALTERNATIVE TRADE POLICIES

By Kenneth L. Robinson

Two types of decisions are involved in formulating a trade
policy. Each nation must decide, first, where it wants to go;
and second, how it will get there. I will discuss both trade
policy objectives and some of the steps a nation might take
in order to achieve its goal.

TRADE POLICY OBJECTIVES

Turning first to the question of trade policy goals or objec-
tives, the major alternatives as I see them'are as follows:

1. No trade (self-sufficiency)

2. Protection

3. Modified free trade

4. Free trade

The first and last alternatives represent the extremes. A
country which chose to follow the first alternative, that is, a
policy of complete self-sufficiency, would not permit any inter-
national trade. A country which chose to follow the other
extreme, that is, a free-trade policy, would eliminate all import
quotas, exchange controls, and tariffs except perhaps minor ones
for revenue purposes only. The alternatives which lie in be-
tween these extremes are much less clear-cut. Actually, one
could list an almost infinite number of intermediate alterna-
tives. I have chosen to discuss two intermediate policies which
I consider the most realistic. By protection is meant a policy
aimed at maintaining relatively high tariffs and at least some
import controls or other restrictions on products which com-
pete directly with domestic industries, but low tariffs and no
controls on items not produced at home. By modified free
trade is meant a low tariff policy and no import licensing
provisions, import quotas, or other quantitative restrictions.

At the present time, none of the major countries attempt
to follow either of the two extreme policies. All nations, even
those behind the iron curtain, find it advantageous to carry on
some foreign trade. In fact, for practically all countries, self-
sufficiency is no longer a real alternative. But not a single
country goes so far as to permit completely free trade. Even
countries such as England and the Netherlands, which once

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