Explaining Gradualism in Trade Agreements: A Political Economy Approach

Abstract

A notable feature of many international trading relationships is the gradual way in which barriers to trade have been dismantled in the post-war period (Bhagwati, 1988). Most notably, large-scale tariff reductions within the framework of the GATT/WTO have come as a result of a series of nine rounds of negotiations that began in 1947. From a theoretical point of view, it is not clear why this process should either proceed in stages or be inherently time consuming. But if one begins from the assumption that free trade is efficient, it makes sense to look for mechanisms related to whatever frictions have led to trade being restricted in the first place. I argue that one important reason that inefficient tariffs are maintained is the exertion of political power by inefficient import-competing industries. When an industry encounters a shock to its support such as a key politician losing an election or an important committee position, its ability to maintain its current level of protection is reduced. The resulting loss of protection and therefore rents can lead to erosion of future political power and accompanying protection. I will make this argument using a dynamic model of political economy. I plan to provide supportive evidence from peril point investigations in the early rounds of the GATT negotiations.

Kristy Buzard

Associate Professor of Economics

My current research focuses on the formation and maintenance of international trade agreements, conflict resolution, and innovation. I am particularly interested in the impact of international institutions, government structure and domestic political pressure on the possibilities for cooperation.