INTERNATIONAL TRADE THEORY AND POLICY--SOME CURRENT ISSUES.

The article presents some issues related to international trade and policy. Equilibrium analysis introduces a bias toward calling maladjustments short run. A movement of capital and labor from one industry to another frequently requires a protraded period of time. Assuming full employment a high degree of internal adjustability to external changes, constant costs and given amounts of resources in the trading countries, it follows that changes in demand among trading countries for each other's goods could have only mild results. There are limits of productivity and real income beyond which international trade adjustment through the play of internal forces cannot, in the general interest, be accepted. A war effects the long run and short run economic development. Western Great Britain created the modern world and was in turn remade by it. The internal mobility on which traditional theory is based was itself a product of external trade, including pre-eminently the external movement of capital, labor, and entrepreneurship to produce the goods which comprised the trade. The over-all result has been a changed conception of how world trade stability must be achieved. Instead of adjustment through internal change, there has developed the view that external stability must depend on maintenance of internal stability at full employment in the leading countries, and particularly in the United States.