The changing preferences of policy makers may have played a greater role.
But our models of such preferences seem the most underspecified and post hoc. There are few theories about the conditions under which policy makers will abandon ideas that produce “bad” results and what ideas they will adopt in their stead. Furthermore, such theories suggest that the recent liberalization process may not be long-lived; changes in leaders or their preferences, or the
onset of bad economic conditions, may lead to the revival of protectionism. In sum, theories of trade preferences seem to provide only poor explanations for the major change in trade policy that has occurred globally in the past decade.
POLITICAL INSTITUTIONS
Can theories that focus on the supply side of trade policy do any better? What role do political institutions play in trade policy making? And are changes in them responsible for the rush to free trade?
A number of scholars have argued that political institutions, rather than preferences, are crucial in explaining trade policy. Although preferences play a role in these arguments, the main claim is that institutions aggregate such preferences and different institutions do so differently, thus leading to distinct policies. Understanding institutions is necessary to explain the actual supply of protection, rather than simply its demand (Nelson 1988). On the domestic side, different institutions empower different actors. Some institutions, for exam- ple, tend to give special interest groups greater access to policy makers, ren- dering their demands harder to resist. For example, many scholars believe that the fact that the US Congress controlled trade policy exclusively before
1934 made it very susceptible to protectionist pressures from interest groups (Destler 1986, Haggard 1988, Baldwin 1986, Goldstein 1993). Other institu- tions insulate policy makers from these demands, allowing them more leeway in setting policy. Thus, some authors argue that giving the executive branch greater control over trade after the Reciprocal Trade Act of 1934 made trade policy less susceptible to these influences and more free-trade oriented. In gen- eral, concentrating trade-policy–making capabilities in the executive branch seems to be associated with the adoption of trade liberalization in a wide vari- ety of countries (e.g. Haggard & Kaufman 1995:199). As Haggard & Webb (1994:13) have noted about trade liberalization in numerous LDCs, “In every successful reform effort, politicians delegated decisionmaking authority to units within the government that were insulated from routine bureaucratic pro- cesses, from legislative and interest group pressures, and even from executive pressure.”
Other aspects of political regimes may make them more or less insulated from societal pressures. Rogowski (1987), for example, has argued that policy makers should be most insulated from domestic pressures for protection in countries having large electoral districts and proportional representation (PR) systems. Mansfield & Busch (1995), however, find that such institutional insu- lation does indeed matter but often in exactly the opposite direction—greater insulation (i.e. larger districts and a PR system) leads to more protection. Simi- larly, D Rodrik (unpublished paper) shows that “political regimes with lower executive autonomy and more participatory institutions handle exogenous
shocks better,” and this may include their response to shocks via trade policy. Thus, it is not clear that greater insulation of policy makers always produces policies that promote trade liberalization; the preferences of those policy mak- ers also matter.
The administrative capacity of the state is also seen as an important factor shaping trade policy. It is well established that developed countries tend to have fewer trade barriers than do lesser developed countries (Magee et al
1989:230–41; IMF 1992; Conybeare 1982, 1983; Rodrik 1995:1483). Part of the reason is that taxes on trade are fairly easy to collect and thus, in LDCs where the apparatus of the state is poorly developed, such taxes may account for a substantial portion of total state revenues (between a quarter and a half, according to Rodrik 1994:77). As countries develop, their institutional capac- ity may also grow, reducing their need to depend on import taxes for revenue.3
For example, the introduction of the personal income tax in 1913 in the United
States made trade taxes much less important for the government, which per- mitted their later reduction. Thus, changes in political institutions may help explain changes in trade policy.
Large institutional differences in countries’ political regime types also may be associated with different trade policy profiles. Some scholars have argued that democratic countries are less likely to be able to pursue protectionist poli- cies. Wintrobe (1998) claims that autocratic countries are more rent-seeking and that protection is simply one form of rent-seeking. Mansfield et al (1997,
1998) also show that democratic pairs of countries tend to be more likely to co- operate to lower trade barriers and to sign trade liberalizing agreements than are autocratic ones. On the other hand, Verdier (1998) argues that, because of the political conflict engendered by trade, democracies may be less likely to pursue free trade and more likely to adopt protection against each other, except when intra-industry trade dominates their trade flows. “The postwar demo- cratic convergence among OECD countries did not hurt trade because similar- ity in endowments, combined with the presence of scale economies, allowed these countries to engage in intra-industry trade—a form of trade with few, if any, wealth effects…. The current wave of democratization endangers trade. Only in the presence of scale economies [and thus intra-industry trade] can democratic convergence sustain trade” (Verdier 1998:18–19). Haggard & Kaufmann (1995) are more circumspect, arguing that the presence of crises and the form of autocracy may influence the ability to adopt economic reforms (such as trade liberalization) more than does regime type alone. Debates over the impact of regime type on trade policy have just begun.