Recall from Chapters 5 and 6 that theoretically. there economic gains when firms from different countries can freely trade and engage in foreign direct in vestment(FDI). However. until the end of World War II. most governments had not accepted these insights In the late 1920s and the early 1930s. virtually all governments tried to protect domestic industries by imposing protection policies through tariffs and quotas. Collectively. these beggar-thv-neighbor policies triggered retaliation that further restricted trade(Figure 8.1). Eventually. trade wars turned into World War II.