Domestic politics and the strategy of international trade
The policymaking problem in international trade is fundamentally strategic, since optimal national policy depends on what other nations choose to do. The game is not between unitary rational actors, however, but rather between players with considerable internal divisions about what policy should be. There is a rich domestic politics to international trade policymaking. Conventional wisdom holds that internal division is a liability in international interactions. This article demonstrates that if countries are divided internally between divergent interests, this will alter the outcome of strategic games between countries in, for example, setting tariffs. In particular, internal division can actually be helpful to a country, since a protectionist faction helps to make a protectionist threat more credible.
Volume (Year): 10 (1991)
Issue (Month): 2 ()
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- Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, March.
- Richard A. Jensen & Marie Thursby, 1989.
"Tariffs with Private Information and Reputation,"
NBER Working Papers
2959, National Bureau of Economic Research, Inc.
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