Divided industries, special interest institutions, and trade policy

Intra-industry trade and offshoring create divisions within industries between pro- and anti-integration firms: what are the effects of these disagreements on trade policy outcomes? Special interest institutions—rules and regulations which empower all interest groups, but especially large firms and trade associations—suggest an answer. In industries where firms are uniformly anti-trade, greater special interest voice should raise trade barriers. In industries where large firms are pro-trade and smaller firms are anti-trade, special interest institutions will lead to lower trade barriers since big firms hold advantages in political action. We test these claims with one kind of special interest institutions—rules on corporate contributions to parties and candidates—and using data on tariffs, trade, and global value chain integration across hundreds of countries and thousands of products. We contribute to the literature on domestic political institutions and trade policy and explain how political institutions shape the influence of pro-globalization firms.