With an average salary of $40,000 in the tire industry, the cost of each job saved was $900,000 paid by the American consumer. From this point of view, trade policy is a series of internal struggles between producers and consumers and not a war between countries. Balance of payments is the settlement of a country`s international transactions. It is divided into the current account, .m trade in goods and services (and some small categories) and the capital balance, .m. asset swaps (mainly portfolio and direct investment). Trade agreements are usually unilateral, bilateral or multilateral. To the extent that democracies are more peaceful than other forms of government, it can be said that free trade indirectly contributes to peace through democratization. Countries that have been more exposed to international trade since the late nineteenth century are less likely to have become authoritarian. As rents generated by protectionist policies are eradicated, the types of individuals and groups that could benefit from these rents lose their incentive to take power. More recently, developing countries participating in free trade agreements (such as Chile, South Korea and Mexico) have generally seen their democracies strengthened.
This is good news for developing countries that may lack absolute production advantages, but will still have a comparative advantage in the production of certain goods. They will export goods where their relative handicap is the lowest and use these export earnings to improve their standard of living by buying goods produced abroad. . . .