Access to a larger market lets a producer grow beyond what domestic demand would support

The argument

Proponents of this position begin from the constraint that a closed market places on any producer. However good a firm's product, the number of customers available to it is fixed by the size of the population that can legally buy it, and once that market is saturated growth stops. Proponents argue that removing the barrier removes the ceiling, and that firms which can sell abroad hire to meet the additional orders. The mechanism proponents point to is scale. Many kinds of production carry heavy fixed costs that are only worth bearing if enough units are sold to spread them, which means some goods cannot be made economically for a small market at all. Opening trade enlarges the market a producer faces, which makes those investments viable, and the investments themselves require workers to build and operate. Proponents argue this is why export industries tend to be among the larger employers in the economies that have them, and why firms lobby for access rather than against it. Proponents add that the effect compounds through specialisation. When producers can sell widely they can also narrow what they do, concentrating on whatever they are relatively best at instead of making a little of everything for a captive market. Narrower specialisation raises output per worker, which lowers costs, which widens the market further. Proponents argue the jobs created in this way are not only more numerous but better paid than those in protected sectors, because they sit in activities where the producer has a genuine advantage rather than ones that survive only because competitors are excluded.

Premises

Counter-arguments

Critics argue the account looks only at the producers who win access and ignores those who lose protection in the same transaction. Every opening is reciprocal, so the firms gaining foreign customers are matched by firms meeting foreign competitors at home, and nothing in the argument shows the first group hires more than the second sheds. They add that the jobs created by specialisation are fewer by construction, since raising output per worker means producing the same goods with less labour. Others object that the gains accrue where the advantage already lies, so economies without an existing advantage may open their markets and acquire the competition without the exports.

Rejecting the premises

[Rejecting P1] Critics argue the ceiling is not fixed in the way the premise assumes. Domestic demand grows with incomes and shifts between goods, and producers routinely find new customers at home by changing what they offer, so saturation is a feature of a particular product rather than of a closed market. [Rejecting P2] The premise is disputed for counting only one side of a reciprocal opening. The same agreement that enlarges one producer's market exposes another to competitors at home, and nothing in the mechanism shows the hiring exceeds the shedding. [Rejecting P3] Critics note that raising output per worker means producing a given quantity with less labour, so the specialisation the premise relies on reduces employment per unit of output and may reduce it absolutely where the market does not expand enough to compensate.