Votes and Vetoes: The Political Determinants of Commercial Openness

Abstract

Some theories of foreign economic policy stress the importance of do- mestic interest groups, whereas others focus on the effects of domestic institutions. Debates between advocates of these approaches are long- standing, but little systematic empirical research has been brought to bear on the relative merits of these theories.We argue that while interest group demands and institutions are often regarded as having inde- pendent and competing effects, it is more fruitful to view the influence of each type of factor as conditional on the other. As explanations em- phasizing societal interests contend, deteriorating macroeconomic con- ditions are a potent source of protectionist sentiment. The extent to which such conditions reduce commercial openness, however, depends centrally on a country’s political institutions, especially the number of veto points in a country’s policy-making structure and its regime type. We expect the effects of macroeconomic conditions on trade policy to become weaker as the number of veto points increases. We also expect both veto points and the societal pressures stemming from the economy to have a more potent impact on trade policy in democracies than in other regimes. The results of our statistical tests covering almost 60 countries during the period from 1980 to 2000 strongly support these arguments.