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Why all the fuzz about trade?

Summary:
Why all the fuzz about trade? The share of US expenditure on imports is smaller than in most other countries. To a large extent, this reflects the fact that for a large country like the United States, a significant fraction of trade occurs intra- rather than internationally. This basic observation implies that that the welfare gains from international trade in the United States are smaller than in most other countries. Although magnitudes vary greatly depending on how one infers the shape of the US demand for foreign factor services, the estimates of gains from trade for the US economy that we review range from 2 to 8 percent of GDP. Though such gains are nothing to spit at—they are an order of magnitude larger than the estimated gains from eliminating

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Why all the fuzz about trade?

Why all the fuzz about trade?The share of US expenditure on imports is smaller than in most other countries. To a large extent, this reflects the fact that for a large country like the United States, a significant fraction of trade occurs intra- rather than internationally. This basic observation implies that that the welfare gains from international trade in the United States are smaller than in most other countries. Although magnitudes vary greatly depending on how one infers the shape of the US demand for foreign factor services, the estimates of gains from trade for the US economy that we review range from 2 to 8 percent of GDP.

Though such gains are nothing to spit at—they are an order of magnitude larger than the estimated gains from eliminating business cycle fluctuations—they may appear surprisingly small to some.

Arnaud Costinot & Andrés Rodríguez-Clare

And then we haven’t even started talking about the asymmetric distribution of pains and gains of international trade …

Lars Pålsson Syll
Professor at Malmö University. Primary research interest - the philosophy, history and methodology of economics.

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