Regulation changes, such as the creation of uniform tariff regimes or the removal of subsidies, are not ends in themselves but steps towards a goal. The aim is to identify whether the goal was achieved so as for its consequences to be acknowledged and valued. .
Underlying the trade liberalisation process is the economic principle of comparative advantage. This theory was formulated by British MP and economist David Ricardo in the early 19th century, and suggests that two countries should trade by taking advantage of their assets (natural, human, financial and technological resources), and thus specialising in the production of those goods and services which each one can carry out most efficiently. .
However, this theory is criticised mostly on four basic assumptions it makes: .
1. There is no government;.
2. The "gainers" from trade compensate the "losers";.
3. Capital and labour are internationally immobile;.
4. There is no trade deficit.
And on the basis of applying this theory into the real world, it is extremely difficult to satisfy any of the above assumptions let alone all of them. .
From Adam Smith to Bill Clinton.
The origins of trade liberalisation are directly related with the free market ideology developed in late 18th and early 19th century. The revolutionary for that time "free to do what you want" concept in trade terms (also known as laissez-faire), saw the removal of controls on wages, the removal of agricultural support and the establishment of free trade.
In his book, The Wealth of Nations (published in 1776), the famous economist Adam Smith provided, amongst other things, a theoretical justification for the abandonment of previously interventionist ideals and policies, and embraced the idea of free trade, saying: .
"If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage".
