Cooperation in Hard Times

Abstract

Hard times give rise to greater demand for protection. International trade rules include provisions that allow for raising barriers to aid industries when they suffer economic injury. Yet widespread use of flexibility measures may undermine the trade system and worsen economic conditions. How do states balance these conflicting pressures? This article assesses the effect of crises on cooperation in trade. We hypothesize that governments impose less protectionism during economic crisis when economic troubles are widespread across countries than when they face crisis in isolation. The lesson of Smoot-Hawley and coordination through international economic institutions represent mechanisms of informal governance that encourage cooperation to avoid a spiral of protectionism. Analysis of industry-level data on protection measures for the period from 1996 to 2011 provides support for our claim that under conditions of shared hard times, states exercise strategic selfrestraint to avoid beggar-thy-neighbor policies.

The Domestic Politics of Preferential Trade Agreements in Hard Times

“…The received wisdom is that economic downturns prompt countries to raise trade barriers (Conybeare, 1983; Cassing et al , 1986; Bohara and Kaempfer, 1991; Bagwell and Staiger, 2003; Davis and Pelc, 2017). Recently, various studies have challenged this claim by pointing out that the financial crisis and recession of 2008–2009 generated little protectionism.…”