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1 J. Int'l Econ. L. 49 (1998)
Comparative Advantage and the Normative Economics of International Trade Policy

handle is hein.journals/jiel1 and id is 59 raw text is: COMPARATIVE ADVANTAGE AND THE NORMATIVE ECONOMICS OF INTERNATIONAL TRADE POLICY by Alan 0. Sykes* INTRODUCTION The law of international trade, national and international, governs the man- ner in which governments intervene in the free flow of goods and services across borders. In this inaugural issue of the Journal of International Economic Law, it is especially appropriate to review the state of economic learning that bears on the wisdom of such intervention. Much of what I have to say will be familiar to economists, and my goal in this paper is not to break new ground but to convey the key insights from the normative theory of inter- national trade in an accessible manner that presupposes no economic train- ing beyond the capacity to appreciate a simple supply and demand diagram. I will begin with the economic theory relating to the impetus for trade, explaining the economic concept of 'comparative advantage', suggesting why the existence of comparative advantage creates profitable opportunities for international exchange, and discussing the possible sources of comparative advantage. I then consider the normative economics of trade based on the exploitation of comparative advantage, reviewing the case for free trade and its caveats, as well as the economics of trade discrimination and of the choice among protectionist policy instruments. A future contribution will survey the positive theory of international trade policy and trade agreements. The prose is cast largely with reference to trade in goods, but I do not wish to slight the increasingly important area of trade in services. Most of what I have to say applies to trade of any sort, and requires at most minor modification for services sectors. 1. THE ENGINE OF TRADE: COMPARATIVE ADVANTAGE International trade occurs because a buyer in one country desires something produced in another country, and is willing to pay the price required to obtain it. Implicitly, the buyer in question must prefer the imported item to a domestically produced substitute, either because it is cheaper or of higher quality (or both), or because domestically produced substitutes are * Frank & Bernice J. Greenberg Professor of Law, University of Chicago. The author is grateful to Alan Deardorff for thoughtful comments.

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