That trade protection hurts the economy of the country that imposes it is one of the oldest but still most startling insights economics has to offer. The idea dates back to the origin of economic science itself. Adam Smith’s The Wealth of Nations, which gave birth to economics, already contained the argument for free trade: by specializing in production instead of producing everything, each nation would profit from free trade. In international economics it is the direct counterpart to the idea that people within a national economy will be better off if they specialize at what they do best instead of trying to be self-sufficient
It is important to distinguish between the cases for free trade for oneself and the case for free trade for all. The former is an argument for free trade to improve one nation’s own welfare (the "national-efficiency” argument). The latter is an argument for free trade to improve every trading country's welfare (the "cosmopolitan-efficiency" argument).
Underlying both cases is the assumption that free markets determine prices, but governments may distort market prices by, for example, subsidizing production or governments may protect intellectual property inadequately, causing underproduction of new knowledge.
The cosmopolitan-efficiency case for free trade is relevant to questions such as the design of international trade regimes. The national-efficiency case for free trade concerns national trade policies; it is, in fact, Adam Smith's case for free trade. Economists typically have the national-efficiency case in mind when they talk of the advantage of free trade and of the folly of protectionism.
The trade policy of the United States today is premised on a different assessment: that indeed U.S. markets can, and should, be closed as a means of opening new markets abroad. This premise underlies sections 301 through 310 of the 1988 Omnibus Trade and Competitiveness Act. These provisions permit, and sometimes even require, the U.S. government to force other countries into accepting new trade obligations by threatening tariff retaliation if they do not. But those ”trade obligations" do not always entail free trade. They can, for instance, take the form of voluntary quotas on exports of certain goods to the United States. Thus, they may simply force weak nations to redirect their trade in ways that strong nations desire, cutting away at the principle that trade should be guided by market prices. Much economic analysis shows that in the past 20 years U.S. "fair trade" mechanisms turned increasingly into protectionist instruments used unfairly against foreign competition.
1.The author mentions that it’s true of Adam Smith that he argued that （ ）.
2.The national-efficiency and the “cosmopolitan-efficiency” argument rest on the assumption that（ ） .
3.According to the passage, all of the following are true EXCEPT the argument that（ ） .
4.The author is most critical of（ ）.
5.The best statement to summarize the author's argument would be（ ） .
