ABSTRACT
Since the rise of industrial capitalism, theoretical support for freer international trade has been based largely on presumed net welfare gains arising from efficiencies due to increased competition. According to classical economic theory, countries can minimize their risks and maximize their gains from such competition if they focus on products for which they enjoy a comparative advantage. However, when this theory was developed, finished goods were traded across borders, while today much international trade is intra-firm between branches of a single multi-national company or between a multi-national company and its subcontractors. Then, capital was immobile; today it flows freely across borders. And the difference in estimated wealth between the richest and poorest quintile of countries was roughly 3:1, almost two orders of magnitude less than today (UNDP 1999).
