RECENT DEVELOPMENTS IN THE THEORY OF INTERNATIONAL-TRADE RELATIONS - INITIATIVES FOR A REORIENTATION OF TRADE-POLICY

The new generation of international trade models, born in the eighties, is reviewed with reference to the trade policy debate on free trade versus trade interventions. The neoclassical theory of trade policy is used as the reference model which is challenged by new trade theories of imperfectly competitive world markets. International trade policies in a world with monopolistic market structures, monopolistic or oligopolistic competition are shown to have different welfare implications. While models of monopolistic competition confirm the optimality of free trade, the most serious attack on free, trade policy comes from oligopoly models of strategic trade policies. By comparing the four trade policy cases - strategic export promotion, strategic export restraint, strategic import restriction and export promotion by means of import restriction - it is demonstrated that this attack is weakened by the nonexistence of a stable rule of optimal intervention and by strategic interdependencies of welfare-oriented national trade policies. Therefore, the new theories of international trade have not shaped a new trade policy paradigm, but they have contributed to better understand the causes of protectionism.