A two-country model of oligopoly in general equilibrium is used to show how changes in market structure accompany the process of trade and capital-market liberalization. The model predicts that bilateral mergers in which low-cost firms buy out higher-cost foreign rivals are profitable under Cournot competition. As a result, trade liberalization can trigger international merger waves, in the process encouraging countries to specialize and trade more in accordance with comparative advantage. With symmetric countries, welfare is likely to rise, though the distribution of income always shifts towards profits.

We examine the implications for strategic trade policy of different assumptions about precommitment in a two-period Cournot oligopoly game with learning by doing. The inability of firms and governments to precommit to future actions encourages strategic behaviour which justifies an optimal first-period export tax relative to the profit-shifting benchmark of an export subsidy. In the linear case the optimal subsidy is increasing in the rate of learning with government precommitment but decreasing in it without, in apparent contradiction to the infant-industry argument. Extensions to active foreign policy, distortionary taxation and Bertrand competition are also considered.

This paper introduces the concepts of direct and indirect factor trade utility functions and uses them to derive Marshallian and Hicksian factor content functions, which express the quantities of factors of production embodied in net imports as functions of the exogenous variables facing the economy. The properties of these functions are discussed and they are used to derive a number of new results. In particular, it is shown that, in certain circumstances, the existence of gains from trade is sufficient for the Heckscher-Ohlin theorem to hold in its factor content form.

We present a new model of multi-product firms (MPFs) and flexible manufacturing, and explore its implications in partial and general oligopolistic equilibrium. Globalization affects the scale and scope (or intensive margin and intra-firm extensive margin) of MPFs through a competition effect and a demand effect. The model highlights a new source of gains from trade: productivity increases as firms become “leaner and meaner”, concentrating on their core competence; but also a new source of losses from trade: product variety may fall. Our results also hold under free entry, which allows in addition for adjustment along the traditional inter-firm extensive margin.

This paper introduces a new index number, the Trade Restrictiveness Index, which measures the restrictiveness of a system of trade protection. The index is a general equilibrium application of the distance function and answers the question: “What uniform set of trade restrictions is equivalent (in welfare terms) to the initial protective structure?” The index is applicable to both tariffs and quotas and permits international and intertemporal comparisons. The index is operational and we provide two empirical examples to illustrate its applicability and to show its superiority to commonly used measures.