Biblio

Many economists believe that international trade and finance is the place where the discipline of economics has
got its origin. But the debates of international trade are not yet entirely solved and, therefore, some issues are still
on the agendas of WTO and other concerned international institutions. The Mercantilists favored exports and
disfavored imports. The Classical economists introduced the theories of absolute and comparative advantages as
well as labor specialization. They also strongly condemned the intervention of the government in trade and
suggested that the market forces can do better if they are left alone. But later on, this assumption of the renowned
Classical economists was first challenged by two 20th century Neoclassical economists, Eli Hecksher and Bertil
Ohlin, both from Sweden (Todaro and Smith, 2006). They replaced the complete labor specialization assumption
with “factor endowment trade theory”. The Modern economists, who developed the protectionist views, in their
turn, challenged both the Classical and the neoclassical economists together. Although most of the economists
and schools of thoughts argue for free trade, there are others who support protection, inward-looking strategies
and import substitution. Tariff is used by many developing countries all over the world to practice this
protectionist view of the Modern economists. Along with its role of protecting domestic infant industries, tariff
also has the advantages of generating tax revenue from international trade, controlling the problems of trade
deficit and balance of payments, and also attracting investors to the protected sectors. Even from the developed
and large countries point of view, the theory of optimum tariff is another argument against free trade. Therefore,
the role of tariff is a matter of practical investigations rather than theoretical generalizations.