The Two Rabbits of International Trade

SEOUL – If you chase two rabbits at once, the old saying goes, both will escape. And yet this is precisely what many governments are required to do: pursue both growth and distributional fairness. The two objectives, though not incompatible, are entirely different from one another, and few policy tools can simultaneously help to achieve both.

This idea matters a lot in trade policy. Much theoretical and empirical research demonstrates that opening trade can spur a country’s GDP growth. But increasing a pie’s size does not guarantee that it will be shared fairly.