For students of trade policy, the lack of congruence between the prescriptions of economic theory and the behaviour of governments poses an immediate puzzle. Most economies have so small a share of global trade or of total trade in a particular product that on their own they are not able to improve their terms of trade.
Unilateral liberalization is the preferred policy prescription of economic theory.
One is that governments are simply lacking in knowledge, unaware of the purported benefits of trade liberalization. These objections may be based either on economic theory or on governments' giving higher priority to non-economic objectives than to the purported gains to be made from trade liberalization. In addition, failure in various domestic factor markets opens the way for deploying tariffs as a second-best instrument to correct distortions in the domestic economy. In such circumstances, the case for free trade is no longer unqualified. The argument is far stronger in the strategic trade literature where, in certain circumstances, international economic relations take on adversarial attributes.