Relative Gains in the Shadow of a Trade War

Abstract

When do people care about relative gains in trade? Much of the international relations scholarship - and much of the political rhetoric on trade - would lead us to expect support for a trade policy that benefits ourselves more than it benefits others. Yet, a large interdisciplinary literature also points to the prevalence and importance of other-regarding preferences, rendering the conventional wisdom contestable. We investigate whether and how relative gains influence trade preferences through an original survey experiment in the midst of the China-US trade war. We find that in a win-win scenario, relative gains shape trade opinion: if both sides are gaining, people want to gain more than their foreign trade partner. However, these considerations are offset in a win-lose scenario where the other side is losing out. Relative-gains considerations causally affect opinion on trade, but not in a beggar-thy-neighbor or even a beggar-thy-rival situation. These findings contribute to our understanding of the role of relative gains in international relations and provide the first experimental evidence that relative-gains considerations can be offset by other-regarding preferences in international trade.