The Politics of International Trade

Forthcoming in: Roger D. Congleton, Bernard N. Grofman, and Stefan Voigt (Eds.), Oxford Handbook of Public Choice, Oxford University Press, Oxford UK.

CESifo Working Paper Series No. 6456

59 Pages Posted: 2 Jun 2017

See all articles by Wilfred J. Ethier

Wilfred J. Ethier

University of Pennsylvania - Department of Economics

Arye L. Hillman

Bar-Ilan University - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: May 03, 2017

Abstract

Traditional international trade models explain comparative advantage and describe aggregate gains for a country from trade and from terms-of-trade improvement but do not address the politics of international trade policy. A positive or predictive model that studies the politics of trade policy requires two premises, both with public choice origins: (1) that political self-interest underlies policy determination of trade policy rather than social-welfare objectives, and (2) politically assignable rents are preferred to budgetary revenue from trade restrictions and aggregate gains from terms-of-trade improvement. Originating political-economy models of protectionism and reciprocal trade liberalization acknowledge on both premises. Subsequent popular (and popularly replicated) models of trade policy include the first premise but not the second. The popular models are inconsistent with the actual conduct of trade policy. We also present public-choice perspectives on strategic trade policy, the most-favored nation clause, preferential trading, duty-free zones, globalization, and direct voting on trade policy, and we review and interpret empirical evidence.

Keywords: Political Support, Rent Creation, Budgetary Revenue, Trade Negotiations

JEL Classification: F130

Suggested Citation

Ethier, Wilfred J. and Hillman, Arye L., The Politics of International Trade (May 03, 2017). Forthcoming in: Roger D. Congleton, Bernard N. Grofman, and Stefan Voigt (Eds.), Oxford Handbook of Public Choice, Oxford University Press, Oxford UK., CESifo Working Paper Series No. 6456, Available at SSRN: https://ssrn.com/abstract=2978524

Wilfred J. Ethier

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898 5105 (Phone)
215-573-4217 (Fax)

Arye L. Hillman (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+97 29 774 6424 (Phone)
+97 29 771 5628 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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