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7 Ιουλ 2015 · What is strategic trade theory? Let us present the argument in a stylized manner so as to highlight the central issue. Suppose there are only two trade partners, represented by one domestic firm and one foreign firm, competing in the world market.
Criticism. Even though a state-centered approach directs our attention to the important role that states play in shaping the structure of their domestic economies, it does have some important weaknesses. A number of studies point out to some problematic issues of the strategic trade theory.
Thus the theory of strategic trade policy has been subject to an unusually detailed academic critique, the upshot of which has been to show that what Brander and Spencer offered was an
17 Ιουν 2021 · Strategic trade theory meant the government had a role in the economy even as it deregulated and used protectionism and subsidies to support American firms. By the 1980s, US industrial companies were more export-oriented than they were in the 1960s.
One of the most cited results of strategic trade theory is that equilibrium trade policies vary with the mode of competition, that is, whether firms compete in quantities or compete in prices.
Strategic trade theory has been criticized on the grounds that its predictions are overly sensitive to modeling assumptions. For example, Eaton and Grossman (1986) show that Brander and Spencer's (1985) seminal result – i.e., when firms compete by setting quantities the optimal policy involves governments subsidizing their domestic industries ...
Theories of strategic trade policy that allow for oligopoly and for strategic interactions, and which appear to justify trade interventions, are analysed sceptically. Also discussed is the industrial policy, and the argument that import protection may be justified if it fosters exporting.
