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Chapter Thirteen: The International Political Economy of Trade
International trade is an increasingly important part of international relations. The logic of trade is driven both by economics and by politics. Because different states, and different groups within states, possess different allocations of the factors of production, trade benefits them unequally. In general, states benefit from opening to free trade: National income rises as a result of specialization. Depending on the level of factor mobility and the country's particular factor endowment, the Stolper-Samuelson and Hecksher-Ohlin theorems cause us to expect certain regular patterns of political behavior over protection. States have a variety of ways to respond to social demands for protection, including tariffs and also nontariff barriers such as health and safety standards, environmental regulations, and currency policy.
- What is the difference between comparative advantage and absolute advantage? How does comparative advantage lead to trade?
- What are the factors of production? When factors are mobile, what groups within a country benefit from opening to trade? What groups are hurt? (Think in terms of factors.) What pattern of politics emerges?
- Why does factor mobility matter? When factors are not mobile, what groups within a country benefit from opening to trade? What groups are hurt? What pattern of politics emerges?
- How can states respond to political pressure from those hurt by free trade? How might currency policy be used to protect domestic producers?
- Why does the level of democracy in a country matter for explaining a state's level of protectionism?
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