Political Economy of Trade Policy

This area of research tries, through the introduction of politics in economic models, to explain the existence and the extent of anti-trade bias in trade policy. The two main approaches, namely, the median-voter approach and the special-interest approach are surveyed. Certain applications of these approaches to policy issues, such as trade agreements, the issue of reciprocity versus unilateralism in trade policy, regionalism versus multilateralism, hysteresis in trade policy and the choice of policy instruments, are discussed. Finally, the empirical literature on the political economy of trade policy is surveyed. The new literature that employs a more ‘structural’ approach is emphasized.