The Ethical Challenge of Trade Policy1
Abstract
There is a major ethical challenge in forming trade policy, but it is not the one most people would think. The word ‘trade’ in this chapter refers to international trade - the exchange of goods and services between countries, driven by the efficiency of specialisation and comparative advantage. If a developing country pays $1 a day in wages, obviously shirts are going to cost less than those made in a country paying wages of $100 a day. But what matters for trade is not that shirts cost absolutely less in the developing country, but that the developing country is relatively more efficient at making shirts than the motor cars made by the industrial country. Trade dictates that shirts will be made in the developing country and be exported to the industrial country. ‘Trade policy’ refers to the government policies that affect this international exchange of goods and services.