Following up on earlier posts, I think that the public choice argument
would take account of the difference between the power of the head of
state and the power of the legislative branch of the government. Heads
of state have the power to negotiate multilateral trade agreements,
although they typically cannot pass the legislation needed to sign the
agreement. Legislators typically have no power to negotiate such agreements.
To see the difference, one must first understand the positions of the
special interests under alternative free trade proposals. Consider first
unilateral free trade. If a president or legislator advocates unilateral
free trade, he will find himself disliked by firms that face competition
from imports because these firms are relatively certain they will lose
and their losses are significant. He will be liked by potential
exporters or other beneficiaries who understand the economics of
international trade. (Under the usual assumptions, dinars spent on
foreign goods must eventually be spent by the foreigners on domestic
goods or something that benefits citizens.) But these people don't study
international trade theory and, even if they did, the gains to any
particular exporter or other beneficiaries are uncertain, particularly
in a competitive market. People in their role as consumers, of course,
stand to gain from free trade. But the benefits to each are relatively
small. Moreover, there is rational ignorance about the effects of
government policies, leaving most consumer-voters in the dark about the
effects of trade policies. So the special interest anti-free trade group
is relatively strong in the pressure group competition that influences
presidents and legislators.
That strength is reduced in a bilateral trade agreement, as the gains to
some exporters become more certain. Also a bilateral agreement can often
be tailored so that it does not hurt particularly important special
interest domestic producers and so that particularly important exporters
are pinpointed as beneficiaries.
Multilateral agreements /significantly/ reduce the relative strength of
firms facing import competition by significantly strengthening the
interests of exporters. Thus GATT, the ECM, and WTO could be more
successful from a political standpoint than unilateral decisions and
bilateral trade agreements. As I recall, this argument, or something
like it, is made in the typical international trade texts (see Krugman
and Obstfeld for example) and also in Mankiw's introductory textbook.
One complaint I have about the Lusztigs book, as reported by O'Brien, is
partly that it fails to recognize this pressure and how it plays out,
given the powers of the head of state and the legislature. Under most
constitutions, only heads of state can negotiate international trade
deals. They are subject to the same pressure as legislators, it seems to
me, albeit more concentrated on specific legislators as Sam pointed out.
The most important difference is not the differential concentration of
pressure, however, but the powers.
If I understand it correctly, the theory presented by Lusztigs seems to
be a kind of after-the-fact justificationist theory. It says that
because presidents have negotiated free trade deals, they must be
subject to less anti free-trade pressure, on balance. The problem is
that legislators are not even in a position to negotiate such deals. So
how can we know the different relative pressure that they, as a group,
would face if they were in that position?
Pat Gunning
|