Liberalisation of International Trade - The Case of Asymmetric Countries

Abstract

The aim of this paper is to analyse the welfare consequences of the processes
of liberalisation of trade between asymmetric states in terms of the various sizes
and effectiveness of their economies and the type of international exchange.
These characteristics ultimately define the distribution of benefits from the
liberalisation of international trade. When it is inter-industry or vertical
intra-industry and barriers in trade are smaller than the difference in the
effectiveness of the economies, the trade liberalisation undoubtedly contributes
to improved social welfare, regardless of the level of effectiveness and the size
of the economy. In the situation, however, of horizontal intra-industry trade,
changes in the welfares of asymmetric countries, caused by their progressing
trade liberalisation, depend on the sizes and effectiveness of their economies.
The welfare of society in either a very big and ineffective or in a small and very
ineffective country could even decrease in such a situation. This is the case
when the increase in consumers’ surplus is not sufficient to compensate for the
decreasing profits of firms.