Deriving people’s trade policy preferences from macroeconomic trade theory

Abstract

In democratic societies, policy-makers supply protectionist trade policies as a result of interest group pressure and demand by the public. However, explaining variation in protectionist demand across groups and individuals is far from trivial. Why most farmers want trade protection, and often obtain it, is easy to explain from a political economy viewpoint. Their per capita benefits from trade protection are usually high, and the low per capita costs of protection are spread across all consumers and taxpayers. But it is far less obvious why the public, to which policy-makers also pay a lot of attention, often supports protectionist policies, too. Related to that, one may wonder why international trade liberalization efforts focus so much on reciprocal steps, though orthodox trade economics tells us that even unilateral market opening is beneficial.