International Business

International trade, by nature, increases the wealth of countries. Trade provides efficient access to a wide range of goods and services. It is considered an instrument with the universal objective of improving the life standards of people, encouraging a country's economic growth and the redistribution of wealth. Its importance can be measured in the continuous increase in the volume of exported and imported goods among nations (World Bank 2016) and furthermore, the interdependence between countries as a result of globalization (Dreher 2006). However, despite the undeniably positive innateness of trade, there are certain sectors of the population who hold a negative perception against it.

The benefits of trade are not just quantified by intangible means but are embedded in key theoretical perspectives. Building on Adam Smith’s ‘Absolute Advantage’ Theory, David Ricardo proclaimed that trading was beneficial even in the case when a country had the absolute advantage on all products (Suranovic 2003). In other words: 'A country does not have to be best at anything to gain from trade. The gains follow from specializing in those activities which, at world prices, the country is relatively better at, even though it may not have an absolute advantage in them'. (WTO nd)

Moreover, the Heckscher-Olin theorem is another key theory that demonstrates how factor endowments are key in understanding the benefits of trade. The theorem explains that certain goods and services utilize factors of production, such as capital and technology, with a different relative intensity (Ghai and Gupta, 2002). Having a relative abundance of such key factors allows for greater access to them and ultimately, a lower cost of production. With this, countries such as Ireland and Uruguay, who are endowed with an abundance of large green fields for grazing, are able to actively export meat and livestock to the rest of the world. (Joseph 2016, FDII ca. 2016)

In addition to the key perspectives above, there are many more theoretical contributions, all offering an unbreakable correlation between international trade and economic prosperity. Contrastingly, public perception on trade equates an entirely different position. Over the last 8 years, there has been a global economic recession. Media reports have called out free trade as being bad for jobs in the United States (Scott, R 2015). We have seen the rise of “anti-establishment” political sentiment across Europe, with mainstream political parties losing support, and both the hard left, and the hard right advancing, particularly since recession has spread across the continent (BBC, Professor Archie Brown University of Oxford). The United Kingdom Independence Party exists in the UK in order to advance the removal of the UK from one the largest single trading blocs in the world - The EU. (UKIP.org, 2015). In 2014 it received the largest amount of votes in the European elections than any other party (Wintour, P., and Watt, N., Guardian 2014). In the United States, where recent Pew Research has shown the political establishment has become more polarised to the right and left on the political spectrum, popular former Democratic presidential primary candidate Bernie Sanders is a critic of free trade. The current Democratic presidential candidate Hillary Clinton and Republican candidate Donald Trump have both also said that they do not support the recently negotiated Trans-Pacific Partnership trade deal. Both cite potential US job losses as reasons not to support the deal (Washington Post 2015). ‘Despite the economic benefits that a given country would accrue from open trade, some individuals would suffer economic harm as a result’ (Mansfield and Mutz 2009, p. 3). These are only some of many public arguments stongly against trade and it’s impacts on domestic prosperity.