Endogenous Trade Protection

Abstract

This article surveys the literature on the political economy of trade policy. The discussion is organized around five propositions. The first is just a statement about the ways in which interest groups can influence government policies. The second proposition is the central point made in the political economy literature, and it explains the existence of policies that transfer income within a country while clearly reducing national welfare. Proposition three discusses how interest groups will be organized in their lobbying over trade policy. The last two propositions are more recent and more controversial. Both of these effects cause the weakening of protectionist forces globally. In proposition four, the article discusses the evidence that globalization has weakened the autonomy of nation states.

Why Are Trade Barriers So Low?

“…Other papers finding a very high weight placed on social welfare in the government utility function include Gawande and Bandyopadhyay (2000), Eicher and Osang (2002), Mitra, Thomakos, and Ulubasoglu (2002), McCalman (2004), Gawande and Krishna (2005), Gawande and Hoekman (2006), and Facchini, Van Biesebroeck and Willmann (2006). For a discussion of this literature, see Magee and Magee (2010).…”