Measuring the benefits of unilateral trade liberalization, Part I: static models

Abstract

Multilateral trade agreements generally require protracted and complicated negotiations. An obvious alternative is unilateral trade liberalization. However, would this simpler route toward free trade improve a country's welfare? This article, the first in a series of two, addresses this question using applied static models of international trade. The second article will examine the issue from the perspective of dynamic models. In the current article, Carlos Zarazaga discusses why static models fail to produce a clear-cut case in favor of unilateral trade liberalization. He points out, however, that static models that find unilateral free trade is harmful owe this negative conclusion to a common assumption-the national product ifferentiation assumption-whose empirical and theoretical foundations have not yet been convincingly substantiated.Trade