ABSTRACT
This chapter examines twenty trade paradoxes. The standard view is that mutual tariff reductions by two countries are mutually beneficial. Many national leaders realize that there is heavy lobbying against free trade by some narrowly based but well-organized protectionists less well-organized but important free trade groups. The introduction of uncertainty adds an extra dimension to the gains obtainable from international trade; along with tastes, endowments, and technology, the degree of risk aversion becomes another consideration in the determinants of the pattern of trade. A problem with technology creation by private firms is that once the new technology is created, it becomes a public good, that is, non-innovating firms can copy and sell the technology. While the ability of emulators to copy new technologies is limited by national patent laws and an international patent treaty, as well as by industrial secrecy, these mechanisms provide limited protection for returns on successful research and development.
