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Trade Negotiations Under Fire: Social Identity and the Rising Opposition to Free Trade

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  • Susanne Keller
  • Sebastian Krautheim

Abstract

Massive protests against - and spectacular failures of - international trade negotiations are an important element of the globalization backlash developed economies have experienced over the last two decades. We analyze a model of endogenous social identity where the government chooses between accepting or rejecting a trade agreement involving the recognition of a lower precautionary standard. We show that protests by an NGO against the trade agreement can alter the social identity equilibrium, feeding back into the political process and possibly resulting in a polarization of society. We focus on two possible outcomes: the trade agreement may either be maintained, but at lower welfare gains than initially expected (the "CETA-case"), or it may be abolished altogether (the "TTIP-case).

Suggested Citation

  • Susanne Keller & Sebastian Krautheim, 2025. "Trade Negotiations Under Fire: Social Identity and the Rising Opposition to Free Trade," CESifo Working Paper Series 12337, CESifo.
    • Handle: RePEc:ces:ceswps:_12337
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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