• Based on the reading, do you think free trade is really free? What are the likely costs of adopting a free trade regime? Do you think governments should play any role in reducing these costs? Why or Why not?

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Tariffs An overview There are many critics of free trade nowadays, but restrictive measures are not new to trade. Countries tended to be highly protectionist over the centuries, and tariffs were used both as a mechanism to deter trade, and as an important source of revenue for the state. For example, tariffs provided revenue for the US government even before the introduction of income tax in this country (Krugman, 2003). While in modern economies tariffs have been substituted by other instruments as a major source of state revenue, their role of trade reduction and protection of selected interests is as relevant now as ever. However, tariffs are also accompanied by a suite of other restrictive trade policy instruments, which have similar (but not equal) protectionist effects. They will be also discussed here, in a later section. Tariffs and their effects on the economy were questioned for the first time by the advocates of free trade in the 19th century. The latter have also managed to determine politicians to create a liberal trade regime that ultimately triggered an unprecedented growth in the world economy. Nevertheless, the fear from foreign competition by landowners, and later the event of war and economic crisis have once more restricted trade considerably (see for example, Cameron and Neal, 2003). After WWII however, the reduction of trade protection and tariff levels have become an important agenda on the negotiation table of most governments. The reason Tariffs An overview There are many critics of free trade nowadays, but restrictive measures are not new to trade. Countries tended to be highly protectionist over the centuries, and tariffs were used both as a mechanism to deter trade, and as an important source of revenue for the state. For example, tariffs provided revenue for the US government even before the introduction of income tax in this country (Krugman, 2003). While in modern economies tariffs have been substituted by other instruments as a major source of state revenue, their role of trade reduction and protection of selected interests is as relevant now as ever. However, tariffs are also accompanied by a suite of other restrictive trade policy instruments, which have similar (but not equal) protectionist effects. They will be also discussed here, in a later section. Tariffs and their effects on the economy were questioned for the first time by the advocates of free trade in the 19th century. The latter have also managed to determine politicians to create a liberal trade regime that ultimately triggered an unprecedented growth in the world economy. Nevertheless, the fear from foreign competition by landowners, and later the event of war and economic crisis have once more restricted trade considerably (see for example, Cameron and Neal, 2003). After WWII however, the reduction of trade protection and tariff levels have become an important agenda on the negotiation table of most governments. The reason