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Chicago Fed Letter, No. 37, September 1990
Two Good Neighbors Lower Their Fences
The barriers to free trade during times of war are quite simple. Both legislative and physical blockades impede the flow of goods on the international scene. The limits on free trade in times of peace, however, are more subtle. Trade restraints between throw up a kind of wall that prevents producers on each side  of the border from specializing in what they do best while encouraging them to engage in tasks to which their location and skills are ill-suited. Consequently, consumers pay dearly in terms of higher prices and lower real wages.


Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, Illinois 60604-1413, USA. Tel. (312) 322-5322

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