Introduction When analyzing free trade versus other systems that promote trade in dissimilar ways, one must take a 360-degree view of all the supporting and detracting factors of each style. There is no such thing as perfect competition or constant returns; these are both factors that can never truly be present due to the nature of an economy. The fact is that “economists do not have reliable models” (Krugman, 1987, p139) to truly reflect economic behavior. But for the sake of theory building, hypotheses like these must be made to prove points and provide new ideas on age-old questions. For this analysis we will compare free trade with strategic trade policy and an external economy system. All three are present, depending on how one would like to model an economy and what complements it most effectively. Strategic Trade Policy First, let's analyze the strategic trade policy system that allows government factions to subsidize and intervene with businesses within. specific sector to encourage the benefit of these companies and innovate the economy. This type of government intervention manipulates trade policy to benefit the country in question through its domestic producers. “When there is a significant domestic market for a good, protection of this market increases the profits of the domestic firm” (Krugman, 1987, p.136) and is the main reason why a strategic trade policy is put in place. The basic idea of ​​this type of policy is to increase wealth or create a benefit, which is the same reason for pursuing any type of business, including trading. This is exactly the sentiment behind what this theory supports; create success through promoting the internal economy. ......middle of paper......true spirit of innovation. With this type of trade, “each country continues to specialize in producing its own comparative advantage until the price of its product equals that of other [countries]” (Carbaugh, 2011, p.73) around the world. While strategic trade policy is not perfect, this theory fits our current society better and should be implemented worldwide to create a climate of healthy competition and better global comparative advantage. Works Cited Carbaugh, R. J. (2011). International Economics (13th ed.). Mason, OH: South-Western Cengage LearningWright State University (2011). Welcome to Wright State University | Wright State University. Retrieved March 18, 2012, from http://www.wright.edu/~tdung/Chapter6_Pugel.htmKrugman, P. R. (1987). What is the Free Trade Pass?. The Journal of Economic Outlook, 1(2), 131-144.