New CEPR eBook co-produced with the UK Department for International Trade
Two hundred years ago, David Ricardo introduced the Principle of Comparative Advantage using a simple yet profound example about the English trading cloth for Portuguese wine.
In this eBook, leading trade policy analysts examine if these insights remain valid in today's world where services, data and technology cross borders as well as goods; where there is a rising China whose growth is heavily dependent on exports; and where they all face a challenging backlash against globalisation.
- Digital disruption doesn't weaken specialisation as a driver of trade, it strengthens it. Better IT and innovative business models allow companies to decide which tasks to perform where. It isn't wine for cloth any more, but Ricardo would have recognised today's global trade dynamics.
- Working in a highly successful sector is no guarantee that your job function won't be outsourced. Rising and sunset sectors is the wrong framing for industrial policy. Policy should focus on building up skills and commerce that is sticky - that has strong commercial reasons to co-locate with talent and specialist suppliers and stay there.
- The 'China Shock' has cruelly exposed the weaknesses in the local labour markets of many Western nations. Fixing those labour markets is essential if support for freer trade is to be restored.