One of the commonly accepted economic propositions is that free trade is a determinant and creator of economic growth. This has been justified based on arguments that free trade permits specialization and enables countries to benefit from production in areas of comparative advantage. However, Irwin (1996) has documented the reservations made by numerous skeptics and hence despite the fact that falling under mainstream acceptance, it is worthwhile noting that it is not so clear-cut. This is backed by the observations of swings from liberal trade regimes to protectionist oriented phases and then back to liberalization. .
Thesis Statement.
World trade is indispensable in promoting the welfare of different nation states.
Description.
While there is no conclusive evidence of a casual link between world trade and economic growth, different researchers have demonstrated that there exists a strong correlation between world trade and economic growth. Analyzing world trade over the last 150 years, Irwin, pg 89 describes three distinct periods that have been characterized by differing trade patterns. This includes the pre-World war era (1879-1913), the inter-war era (1920-1938), and the post world war era (1950-2000). .
During the nineteenth century, trade grew slightly more rapidly than in income, in the interwar and post war periods, the trade income relationship can be divided into different structural breaks, but since the 1980s trade has been more responsive to income than in any other period under consideration. A WTO 1995 press release provides reinforcing data. World trade grew 14 times over a 45-year period i.e. (1950-1995) while the world economic output grew 5.5 times over the same time horizon.
Trade Patterns.
Evaluating the dimensions of degree of liberalization, and the trade commodity composition could make an analysis of trade patterns.
Irwin pg 89, describes trade patterns that have characterized the last 150 years.
