Podcast
Questions and Answers
According to the Stolper-Samuelson Theorem, who benefits from free trade in a country that is abundant in unskilled labor and scarce in capital?
According to the Stolper-Samuelson Theorem, who benefits from free trade in a country that is abundant in unskilled labor and scarce in capital?
What economic group faces the worst collective action problem?
What economic group faces the worst collective action problem?
What does the sector model assume about factor mobility?
What does the sector model assume about factor mobility?
Scheve and Slaughter's research on US voter attitudes finds that:
Scheve and Slaughter's research on US voter attitudes finds that:
Signup and view all the answers
What are the two main models of societal interests?
What are the two main models of societal interests?
Signup and view all the answers
The factor mobility assumption is a key distinction between the two models of societal interests.
The factor mobility assumption is a key distinction between the two models of societal interests.
Signup and view all the answers
Consumers are often much larger than the losers of trade.
Consumers are often much larger than the losers of trade.
Signup and view all the answers
The winners of trade are often much larger than the losers of trade.
The winners of trade are often much larger than the losers of trade.
Signup and view all the answers
What is a collective action problem?
What is a collective action problem?
Signup and view all the answers
The Smoot-Hawley Tariff Act of 1930 was designed to promote free trade.
The Smoot-Hawley Tariff Act of 1930 was designed to promote free trade.
Signup and view all the answers
What are the two main types of protectionist measures?
What are the two main types of protectionist measures?
Signup and view all the answers
The Smoot-Hawley Tariff Act of 1930 was a product of logrolling.
The Smoot-Hawley Tariff Act of 1930 was a product of logrolling.
Signup and view all the answers
Who were the primary beneficiaries of the Smoot-Hawley Tariff Act?
Who were the primary beneficiaries of the Smoot-Hawley Tariff Act?
Signup and view all the answers
The Reciprocal Trade Agreements Act (RTAA) of 1934 was an attempt to undo the Smoot-Hawley Tariff Act.
The Reciprocal Trade Agreements Act (RTAA) of 1934 was an attempt to undo the Smoot-Hawley Tariff Act.
Signup and view all the answers
The RTAA of 1934 gave Congress greater authority to set trade policy.
The RTAA of 1934 gave Congress greater authority to set trade policy.
Signup and view all the answers
The RTAA of 1934 was credited with ushering in an era of trade liberalization globally.
The RTAA of 1934 was credited with ushering in an era of trade liberalization globally.
Signup and view all the answers
What is a majoritarian electoral system?
What is a majoritarian electoral system?
Signup and view all the answers
What is a proportional representation electoral system?
What is a proportional representation electoral system?
Signup and view all the answers
Majoritarian electoral systems tend to be more protectionist on average.
Majoritarian electoral systems tend to be more protectionist on average.
Signup and view all the answers
What is malapportionment?
What is malapportionment?
Signup and view all the answers
In general, countries with more veto players tend to experience more change and flexibility in policy.
In general, countries with more veto players tend to experience more change and flexibility in policy.
Signup and view all the answers
What is a veto player?
What is a veto player?
Signup and view all the answers
In developing countries, democracy is associated with a higher likelihood of trade liberalization.
In developing countries, democracy is associated with a higher likelihood of trade liberalization.
Signup and view all the answers
Autocratic trade policy is highly dependent on the leader’s time horizon and their political goals.
Autocratic trade policy is highly dependent on the leader’s time horizon and their political goals.
Signup and view all the answers
Autocratic regimes are better able to overcome domestic opposition to trade agreements compared to democracies.
Autocratic regimes are better able to overcome domestic opposition to trade agreements compared to democracies.
Signup and view all the answers
Autocrats face no opposition from elite interests in implementing trade policy.
Autocrats face no opposition from elite interests in implementing trade policy.
Signup and view all the answers
Autocrats are better able to commit to trade agreements and build trust with international trade partners.
Autocrats are better able to commit to trade agreements and build trust with international trade partners.
Signup and view all the answers
The EU is a three-level game where the interests of domestic actors, the EU as a whole, and other states are considered.
The EU is a three-level game where the interests of domestic actors, the EU as a whole, and other states are considered.
Signup and view all the answers
The European Commission has authority to negotiate trade agreements without first obtaining approval from the Council of the EU.
The European Commission has authority to negotiate trade agreements without first obtaining approval from the Council of the EU.
Signup and view all the answers
The EU’s trade agreements must be ratified by all member states before they can take effect.
The EU’s trade agreements must be ratified by all member states before they can take effect.
Signup and view all the answers
The CETA (Comprehensive Economic and Trade Agreement) between the EU and Canada was fully ratified in 2017.
The CETA (Comprehensive Economic and Trade Agreement) between the EU and Canada was fully ratified in 2017.
Signup and view all the answers
One of the major arguments against the CETA is the inclusion of an investor-state dispute settlement (ISDS) mechanism.
One of the major arguments against the CETA is the inclusion of an investor-state dispute settlement (ISDS) mechanism.
Signup and view all the answers
Embedded liberalism argues that welfare states are vital for mitigating the negative effects of globalization and promoting political stability.
Embedded liberalism argues that welfare states are vital for mitigating the negative effects of globalization and promoting political stability.
Signup and view all the answers
The United States and United Kingdom are seeing significant backlashes against globalization.
The United States and United Kingdom are seeing significant backlashes against globalization.
Signup and view all the answers
The size of the welfare state is not directly correlated with the level of trade openness or the prevalence of globalization.
The size of the welfare state is not directly correlated with the level of trade openness or the prevalence of globalization.
Signup and view all the answers
According to the Stolper-Samuelson Theorem, who benefits from free trade in a country that is abundant in unskilled labor and scarce in capital? (Select all that apply)
According to the Stolper-Samuelson Theorem, who benefits from free trade in a country that is abundant in unskilled labor and scarce in capital? (Select all that apply)
Signup and view all the answers
What does the sector model assume about factor mobility? (Select all that apply)
What does the sector model assume about factor mobility? (Select all that apply)
Signup and view all the answers
What is the key distinction between the two societal interests models for trade?
What is the key distinction between the two societal interests models for trade?
Signup and view all the answers
The factor model argues that trade liberalization will lead to an increase in the wages of workers in sectors that use a lot of that factor.
The factor model argues that trade liberalization will lead to an increase in the wages of workers in sectors that use a lot of that factor.
Signup and view all the answers
What is the name of the theory that predicts that the effects of trade liberalization are concentrated in specific sectors?
What is the name of the theory that predicts that the effects of trade liberalization are concentrated in specific sectors?
Signup and view all the answers
What is the biggest problem associated with the concept of collective action?
What is the biggest problem associated with the concept of collective action?
Signup and view all the answers
What does the term 'logrolling' refer to in the context of trade policy?
What does the term 'logrolling' refer to in the context of trade policy?
Signup and view all the answers
What does the term 'protectionist' interest' refer to in the context of trade policy?
What does the term 'protectionist' interest' refer to in the context of trade policy?
Signup and view all the answers
What is the name of the act that enacted tariffs on many goods in 1930?
What is the name of the act that enacted tariffs on many goods in 1930?
Signup and view all the answers
What was the main goal of the Reciprocal Trade Agreements Act (RTAA) of 1934?
What was the main goal of the Reciprocal Trade Agreements Act (RTAA) of 1934?
Signup and view all the answers
What is the name of the theory that suggests that diplomats play two simultaneous games: one at the international level and one at the domestic level?
What is the name of the theory that suggests that diplomats play two simultaneous games: one at the international level and one at the domestic level?
Signup and view all the answers
The European Union represents a three level game where the EU level serves as an intermediary between domestic policies and other states.
The European Union represents a three level game where the EU level serves as an intermediary between domestic policies and other states.
Signup and view all the answers
What is the name of the international trade agreement between the EU and Canada that is still waiting for ratification?
What is the name of the international trade agreement between the EU and Canada that is still waiting for ratification?
Signup and view all the answers
The theory of embedded liberalism argues that countries with more liberalized internal markets also have more liberalized external markets.
The theory of embedded liberalism argues that countries with more liberalized internal markets also have more liberalized external markets.
Signup and view all the answers
Trade liberalization is a private good which makes it a difficult political strategy for democratic leaders to implement.
Trade liberalization is a private good which makes it a difficult political strategy for democratic leaders to implement.
Signup and view all the answers
Malapportionment refers to the unequal distribution of representation in a country.
Malapportionment refers to the unequal distribution of representation in a country.
Signup and view all the answers
What is the main political factor that makes it more difficult for a country to adopt a trade liberalization policy?
What is the main political factor that makes it more difficult for a country to adopt a trade liberalization policy?
Signup and view all the answers
Democratic countries tend to engage more in trade with each other, compared to mixed pairs.
Democratic countries tend to engage more in trade with each other, compared to mixed pairs.
Signup and view all the answers
Autocratic countries are less likely to face domestic opposition to trade liberalization compared to democratic countries.
Autocratic countries are less likely to face domestic opposition to trade liberalization compared to democratic countries.
Signup and view all the answers
Free trade is more likely to be implemented by democratic leaders in developing countries than in developed countries.
Free trade is more likely to be implemented by democratic leaders in developing countries than in developed countries.
Signup and view all the answers
Trade liberalization can cause job losses and other negative consequences for certain sectors and industries, even though it may benefit the overall economy.
Trade liberalization can cause job losses and other negative consequences for certain sectors and industries, even though it may benefit the overall economy.
Signup and view all the answers
Study Notes
Domestic Politics of Trade II: Institutions
- Recap Questions
- Stolper-Samuelson Theorem: Owners of capital and unskilled workers in sectors that use unskilled labor intensively benefit from free trade in a country abundant in unskilled labor and scarce in capital.
- Worst collective action problem: Workers face the worst collective action problem.
- Sector model assumptions: Capital can easily switch between sectors, but labor cannot. Capital is free to move between countries, while labor is free to move between countries.
- Scheve and Slaughter's research: Higher-skilled individuals are less supportive of trade restrictions, based on their research on US voter attitudes.
- The sector model is more consistently supported by the data than the factor model.
- Recap of last class
- Societal interests: two models (Factor (Stopler-Samuelson) , Sector (Ricardo-Viner)).
- Factor mobility assumption is key for distinction.
- Help understanding who is likely to support/oppose liberalization.
- Issues: Individuals may be unaware of what's good for them, they may be influenced by elite discourse, and identifying costs/benefits is difficult due to supply chain complexity.
- Evidence for both theories at the individual level is mixed.
Interests, Ideas & Institutions
- Diagram illustrating the relationship between societal/elite interests, elite interests, domestic institutions, the interpretation of interests (ideas/ideology), political interests, international institutions, and policy outcomes.
Domestic Institutions
- Key Questions:
- Who can organize and influence policymakers?
- Whose preferences matter?
- How do different institutions shape preferences?
US Coca-Cola vs. European Coca-Cola
- Difference: Different ingredients. Outside the US, Coca-Cola uses cane sugar; US Coca-Cola uses corn syrup.
- Sugar prices: Sugar prices are very high in the US, almost double the price paid by the rest of the world.
- Graph: Data illustrating US and World wholesale sugar prices from 1982 to 2012.
US Coca-Cola vs. EU Coca-Cola
- Price difference explanation: US government limits foreign sugar imports with quotas. Limiting supply to more expensive US-produced sugar. Consumers must pay more or find substitutes (Corn Syrup).
- Losers and winners: Everyone loses out but US sugar producers.
A similar story from Indonesia
- Sugar price difference: The price of sugar in Indonesia is 3 times the global price.
- Government's role: The Indonesian government highly controls who can produce sugar domestically to keep prices high.
GAME PLAN
- Collective Action Problems: How do institutions help/exacerbate the problem?
- Institutions broadly: Level of Democracy, Electoral Systems, Veto Players
- EU's Trade Institutions: 3-level games, the Welfare State and Compensation for the Losers of Trade.
- Farmers vocal: Farmers are often very vocal in their political demands, as the presentation shows images of farmer protests.
The Collective Action Problem and Trade
- Collective action problem description: The larger the group, the harder it is to organize & the greater the incentive to defect (or free ride). Winners (consumers) tend to be a larger group than losers. Losers tend to organize better than winners.
- The larger the group, the harder it is to organize for change. Smaller groups have a greater incentive to free ride.
- Implications for trade policy: Protectionist interest groups often get their way. Free trade is the exception, not the rule. Another barrier on top of previous cooperation problems. Institutions may heighten or ameliorate this problem.
Smoot-Hawley Tariff Act of 1930
- Bill: A bill enacted tariffs on many goods as a response to low agricultural prices.
- "Logrolling": An exchange of favors between lawmakers to get things done. A product of logrolling.
- Success for protectionists: US protectionist special interests benefited.
- US farm problems: US farms found it hard to compete abroad.
Smoot-Hawley/RTAA Conclusion
- Institutional rules influence societal interests in trade policy.
- Institutions and preferences impact trade liberalization, but it is difficult to know which plays the greater role. Identifying possible mechanisms from single case studies is challenging. Possible feedback loops: trade liberalization leads to more exporter support of free trade institutions.
Broader Institutional Effects
- Electoral Systems
- Majoritarian: Sector-based organization, small districts, more protectionism on average (Both tariffs and NTBs).
- Proportional representation: Organization around factors, representing national constituencies, less protectionism on average.
Malapportionment
- Uneven representation: Countries characterized by uneven representation where subsets hold disproportionate political power. This is frequently given to populations based on rural representation, country size, single-member districts and federalism.
- Mal-apportionment in the US: 51% of the US Senate represents 18% of the US population. The Netherlands doesn't experience this problem.
- Scores: Scores for malapportionment (or MAL scores), as used by Samuels and Snyder (2001), indicate the percentage difference between how many seats a particular district would have if its representation were not malapportioned and their actual apportionment. For example, a score of 0.5 means that a district should be represented twice as much as it is under the existing apportionment.
US Coca-Cola vs. EU Coca-Cola
- Sugar production: geographic map of US sugar beet and cane production across congressional districts.
Veto Players
- Difficulties in policy changes: Some political systems make change more difficult due to numerous veto players.
Democracy/Autocracy
- Democracies: - Tend to engage in trade more with each other relative to mixed pairs. - More equipped to overcome barriers to bargaining (enforcement and information). - Less reliant on state revenue from tariffs. - In developing countries, democracy strongly correlates with trade liberalization. - Tariffs are often private goods in democracies. Democratic leaders more concerned with public goods like trade, which remains in power.
- Autocracies: - Conditional trade policies, depending on the factor of production owned by the ruling class plus the leader's time horizon - Autocratic leaders can be easier to gain agreements than democratic leaders
- Evidence: - Polity scores measure democracy; a higher Polity score indicates a more democratic system.
Global Evidence on Democracy and Tariffs
- Data Analysis: Correlation between tariff rates and polity scores using research data (Milner & Kubota, 2005). Evidence suggests tariff rates decrease as democracy increases.
Embedded Liberalism
- Internal and external markets: countries with more liberal internal markets tend to have more liberal external markets.
- Trade and welfare states: a larger welfare state and involvement in trade correlate. A welfare state supports the losers of trade so that they are less likely to oppose liberalization.
- Backlashes to globalization: The US and UK showing backlashes to globalization, presumably because of trade-related hardship experienced by certain populations.
Trade Drives the Welfare State in Democracies
- Graph showcasing the relationship between trade and government spending over time.
Societal Interests Takeaway
- International politics: Need to understand domestic politics.
- Trade winners & losers: Trade causes winners and losers domestically.
- Approaches: Factor and sector models are two prominent approaches to identify winners and losers.
- Domestic institutions shape policy: Domestic institutions shape societal interests into policy.
Next: Supply Chains, Multinational Enterprises and International Investment
- This is the next topic of study.
Suggest Quiz Questions
- Instructions for accessing a quiz.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Test your understanding of the key concepts in the Domestic Politics of Trade, including the Stolper-Samuelson Theorem and the factor and sector models. This quiz covers collective action problems and the implications of labor and capital mobility in trade. Assess your knowledge on how societal interests influence trade restrictions.
