An addition to the large stock of books on trade theory calls for strong justification. We believe we have one, although not in any novelty of basic aims. On the contrary, we claim that previous treatments fail, often in not pursuing their own avowed aims far enough, and almost always in not pursuing them by the most efficient means.

It is always said that trade theory is a showcase for the theory of general economic equilibrium. Too much of it, however, usually considers only a part of the whole equilibrium, namely the comparative statics of production in one country. This occurs in some discussions of the effects of changes in factor endowments or technologies and of tariffs, but most importantly in dealing with factorprice equalization. The usual way to pose that question is as one of determining factor prices given output prices, or assuming diversified production. Both of these assumptions should really be a part of the whole equilibrium being studied. It turns out that the usual partial insights are very misleading when it comes to such a complete equilibrium of trading countries.

Secondly, when generalizing the simple two-by-two model, trade theorists often forget the lessons to be learnt from general microeconomic theory as to the right questions to be asked.