Adjustment, Ambiguity, and Policy Interventions A Political Approach to the Domestic Politics of Trade Mark R. Brawley Dept. of Political Science

Politics and Trade Current interpretations based on general equilibrium models Interests depicted as:  exclusive  consistent Political parties presented as passive receptacles of interests Cleavages shift more often, more rapidly than these predict

Politics and Trade: Ambiguity Why would preferences shift? Ambiguity arises from relaxing the general equilibrium condition Preferences then turn on expected income (i.e. trade shapes both rates of return and employment opportunities) For select groups, trade moves these in opposite directions

Observing the cleavage... Abundant Factor Intensive Sector Abundant Factors Scarce Factors Scarce Factor Intensive Sector

The Stolper-Samuelson View Free Trade Protection Abundant Factor Intensive Sector Abundant Factors Scarce Factors Scarce Factor Intensive Sector

The Sector-Specific Perspective Free TradeProtection Free TradeProtection Abundant Factor Intensive Sector Abundant Factors Scarce Factors Scarce Factor Intensive Sector

Where do we look for swings? Free Trade? ?Protection Abundant Factor Intensive Sector Abundant Factors Scarce Factors Scarce Factor Intensive Sector

Cleavages in the DMM Model free trade ambiguous protection free trade Abundant Factors Scarce Factors Mobile across sectors Specific to abundant- factor intensive sectors Specific to scarce- factor intensive sectors

Domestic Policy Interventions Interventions in adjustment can reduce ambiguity (e.g. unemployment benefits, “matching,” and sector’s “break-up” rates) Interventions tilt swing groups’ preferences

Cleavages in the DMM Model free trade ambiguous protection free trade Abundant Factors Scarce Factors Mobile across sectors Specific to abundant- factor intensive sectors Specific to scarce- factor intensive sectors

Advantages of this Approach Politicians can use trade policy as a tool in their competition Cleavages are fluid Domestic and foreign policies are integrated in one model Better equipped to address questions about politics