RECENT DEVELOPMENTS IN THE THEORY OF INTE RNATIONAL-TRADE RELATIONS -INITIATIVES FOR A REORIENTATION OF TRADE-POLICY

The new generation of international trade models, born in the eighties , is reviewed with reference to the trade policy debate on free trade versus trade interventions. The neoclassical theory of trade policy is used as the reference model which is challenged by new trade theories of imperfectly competitive world markets. International trade policie s in a world with monopolistic market structures, monopolistic or olig opolistic competition are shown to have different welfare implications . While models of monopolistic competition confirm the optimality of f ree trade, the most serious attack on free, trade policy comes from ol igopoly models of strategic trade policies. By comparing the four trad e policy cases - strategic export promotion, strategic export restrain t, strategic import restriction and export promotion by means of impor t restriction - it is demonstrated that this attack is weakened by the nonexistence of a stable rule of optimal intervention and by strategi c interdependencies of welfare-oriented national trade policies. There fore, the new theories of international trade have not shaped a new tr ade policy paradigm, but they have contributed to better understand th e causes of protectionism.