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  /  Why is free trade impossible? Theoretical approach to the trade policy in international oligopoly

Why is free trade impossible? Theoretical approach to the trade policy in international oligopoly


The purpose of this paper is to formulate a modernized traditional theory of trade and protectionism (tariffs and subsidies effects) with regard to imperfectly competitive markets. There will be shown the different effects of trade policy instruments concerning international oligopoly than perfectly competitive market. I will outline the new area of tariffs and subsidies effects, which are based on the Cournot model analyzes. There will be also shown results of trade policy instruments with regard to national and world welfare improvement. Secondly, I will point out the available anti-import activity and some ways of export supporting. I will proof, that there is no matter, which tariffs government uses, the effects in rent-shifting is comparable. The same case is done with regard to the subsidy. There is no need to use direct export subsidy (which are prohibited), the similar result is seen in the case of R&D subsidies or any public aid given to national producer, which is the player in the international oligopoly. Finally, there will be calculated tariffs and subsidies effects made in Scientific Workplace 4.0. I will use previously formulated model for presenting the impact of import tariffs and export subsidies on welfare.