Krugman (1986) argues that “although most economists continue to have a strong belief in the desirability of free trade, the economic analysis on which the classic case for free trade wasbased is beginning to look increasingly unrealistic” . What are the economic reasons thatlead Krugman to support the need for an activist trade policy? Complete your answer byexplaining the reasons why Deraniyagala and Fine say that the policy implications of new trade theory “are rejected even by those at the forefront of these theories, on the grounds of political economy arguments which do stand up to careful scrutiny”
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