Sustainable effects of technological progress and trade liberalization

This paper examines the controversy involving international trade by employing a simple model. It analyzes the effects of unilateral technological improvements in one entity on the welfare of that entity and its trading partners. Improvements in one country are irreversible and lead to substantial welfare effects on its trading partner. The result reveals some unpleasant free trade arithmetic. However, the results do not suggest that the trade should be curtailed. Rather, the paper advocates a critical need to allocate additional resources in order to maintain their competitive edge in an era when economies are becoming increasingly integrated.