Platform:Ever since David Ricardo constructed his simple two-country, two-product analysis back in 1817, all right-thinking people have understood that trade is good.
The British make the wool, the Portuguese make the wine, and because of the magic of specialisation, scale economies and comparative advantage, everyone is better off from the cross-border exchange.
Economics has developed considerably since then, but the logic of free trade has remained essentially unchanged.
Therein lies a problem, because in the real world of many countries and many goods, of multinational corporations and the free flow of technology and capital, "free trade" may not be the win-win proposition that economic theory suggests.
Consider Intel's recent announcement that it would build an advanced $2.5 billion (€1.8 billion) chip fabrication plant in Dalian, on China's northeast coast.
We can all agree this plant will be a boon to the Chinese economy and we can be pretty sure it will be in the interests of Intel shareholders. But is it really in the best interests of the US economy?
It would be one thing if the Chinese had developed the capacity to make advanced microchips on the basis of their own investment and ingenuity.
It is quite another thing though when the technology for the chips and chip production has been created by American researchers and American companies and transferred wholesale to a developing country that makes no secret of its intention to use that knowledge and experience to improve its own industry.
By what reasoning is this a net plus for an American economy that is supposed to prosper in this globalised world on the basis of its high-tech know-how?
As it turns out, the reason it will be cheaper for Intel to make those chips in China has little to do with lower-cost labour.
In fact, a study by the Semiconductor Industry Association found that 90 per cent of Asia's cost advantage over US production is attributable to government subsidies and tax breaks.
In the case of Intel's new plant, I'm reliably told that those subsidies amount to about $500 million.
There is a name for this kind of economic pump priming - strategic trade - and economists have known for decades that, when pursued by a developing economy, it can largely negate the benefits of trade to a developed country like the US.
That was Paul Krugman's contribution to trade theory, and it is as relevant now in thinking about China as it was about Japan when Krugman devised it.
In the hands of Japan and China, strategic trade has also involved currency manipulation - keeping the value of their currencies artificially low to stimulate exports and put foreign competitors at a disadvantage.
The result is a large and growing US trade deficit which, with each year represents a drain on the national income and transfer of ownership of the country's productive capacity into foreign hands.
These are very real costs, but as far as I can tell, they are rarely included when economists calculate the benefits of trade.
