ABSTRACT
This chapter examines several propositions in the pure theory of international trade, under various forms of market imperfections. Both the normative and positive aspects of the real theory of trade have been analyzed within the distortionary framework. The approach adopted has been to introduce one and/or two distortions at a time and examines standard propositions of international trade in the presence of such an imperfection. The optimality of free-trade policy is analyzed in the presence of factor price differentials, externalities, monopoly and minimum real wage constraint. An alternative procedure is to set up a very general model and examines all these cases as subsets. This procedure is analytically appealing, but from a pedagogical point of view it is better to proceed from the particular to the general. It is possible to formulate some general propositions regarding the welfare consequences of imperfectly competitive markets. These generalized propositions do not exist in the positive branch of the theory of trade and distortions.
