Rent-Seeking and Trade Policy: An Industry Approach

In recent years economists have modeled the process by which particular industries and income groups seek protection against import competition through lobbying and bloc voting1. The earliest theoretical work on the subject is the classic paper by Stolper and Samuelson [1941] in which the authors demonstrate that in a standard two-good, two-factor Heckscher-Ohlin model, the factor used intensively in the import-competing sector will gain in real income terms from protection whereas the other factor will lose. Unfortunately, the Stolper-Samuelson theorem does not seem to be very useful for understanding the nature of present-day protectionist pressures. As Magee [1980] found in analyzing testimony given during the Congressional hearings on the 1974 U.S. Trade Act, representatives of labor and capital from the same industry almost always take the same position concerning the desirability of granting the President the authority to undertake another trade-liberalizing multilateral negotiation. The divergence in views on the issue of further trade liberalization is along industry lines rather than between capital and labor.