January 1, 2001
Mainstream economists argue that free trade is the best policy. Yet there are also the arguments that economic openness may not always be beneficial. The debate has been carried on from the days of Adam Smith and really does not bring anything new to the table. At the same time, it directs attention away from two more important issues, namely, the relationship between trade and political international conflict and the relationship between economic openness and the ecosystem. These issues stand at the center of my paper. Economists generally believe that since conflict is bad for business, trade will promote peace. Yet the real world is not about homo-economicus actors, but about homo-politicaleconomicus actors. As such, trade could promote international conflict. The standard story also assumes, explicitly or implicitly, that ecological constraints do not bind. Yet there are signs that the global picture is beginning to change. Once these two issues are considered, there are policy implications for economic openness.