Key assumptions of the theory and the econometric models used to calculate the impacts of trade are questionable. For example, the standard Global Trade Analysis Project econometric model assumes perfect competition with no single producer having any measurable impact on market prices or costs.

But that certainly isn’t true in such cases as Boeing and Airbus. The model also assumes that the unit cost of a product is the same whether you make one or a thousand units. In fact, mass production typically leads to falling costs.

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