The Trade Advantage Argument

Robert Driskill wrote a good Paper(pdf), and I decided to read it, because of the Thoughts of Dani Rodrik and Arnold Kling. It will inevitably led me into trouble, as I feel I must place my own impress upon the Issue. The confusion of the Issue resides in usage of the Ricardian Two-Good model in the first place. Understand that the Ricardian model is a formalization of an efficiency model which expounds methodology for compressing Production inputs in the Production process, in order to attain a higher rate of Output at less Cost. It works equally as effectively internally as externally, and will carry over into the arena of technological advance theory as well. One does not understand that the Ricardian model will work in the periphery of Trade Advantage, though Most assume that it will work effectively.

The basic Argument of Trade Advantage necessitates a Gain in national good; whether it is a discussion of an increase in Gross Domestic Product, a rise in the average standard of living, or the average Capitalization of Households. The Ricardian model teaches Us a methodology for reduction of Production inputs in constructing greater Output, but actually attacks most principles of full employment theory–calling for less Labor, less materials–again less Labor, and actual higher Pricing–due to additional Transportation Costs, greater Distribution and Marketing Costs, etc. Exterior Costs are always entailed, due to multi-national Marketing and the Accounting Costs of managing a multi-national business. These Costs are all-important in the Trade Advantage decision process, as the Price Markups lack real labor-intensity. The upshot of Trade basically results in a necessary sophistication of Labor Skills, while at the same time, reducing the resultant labor required.

Arnold Kling postulates that free trade is justified because it is essentially Voluntary. Robert Driskill believes, as does Rodrik, that there is inherent advantage in Trade, but that Economists fail to adequately expound those advantages. I would take an alternate position of suggesting those Advantages are not highlighted because they do not exist, in all too many circumstances. My position would not matter, except for the belief I possess that Free Trade practice will lead to long-term degradation of Living Standards; a factor hidden in the Short-run by wide sweep of new Products and Services generated by open Trade. Perhaps the Driskill thesis should be restated as the real difference between Trade Liberalization and Trade Advantage. lgl