Inequality and endogenous trade policy outcomes

An enduring puzzle in international economics is why trade interventions are biased in favor of import-competing rather than export sectors and therefore restrict trade. In this paper, we show that if the government’s objective reflects a concern for inequality then trade policy generally exhibits an anti-trade bias. Importantly, under neutral assumptions, the mechanism that we analyze generates the anti-trade bias independently of whether factors are specific or mobile across sectors. The mechanism also generates an anti-trade bias between large countries even after they sign reciprocal trade agreements that eliminate any terms-of-trade motivation for the use of trade protection.