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The case of unilateral free trade #1

Consider two countries, Britain, and Sweden, and two sorts of products which are popular in the other. Sweden is good at balls - meat balls, as sold at IKEA, and SKF balls. Britain is good at some fancy cheeses - Blue Stilton, and engineering components, such as those used in the marine sector.

We start off with mutual tariffs. British ball eaters are paying more for their meatballs, or eating inferior balls, and British manufacturers are paying more for their ball bearings, or using inferior balls in their products. Swedish cheese fanciers are paying more for their Stilton or making do with an inferior cheese, and Swedish yacht builders are paying more for their widgets, or using inferior widgets.

If Sweden unilaterally takes down its tariffs, then Swedish cheese fanciers get their cheese of first choice at a lower price, and Swedish yacht builders get the components they really want, at a lower price, which makes them more competitive. In the meantime, the British ball eaters continue to pay more for their meatballs, or eat inferior balls, and British manufacturers continue to pay more for their ball bearings, or use inferior balls in their products.

If, in this situation, the British do not reciprocate, they are the losers. The Swedes are still better off than if they waited for the British to do the deal.

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