The Political Economy of International Trade Relations (Accomplishment-Based Renewal)

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9514974 Grossman This Accomplishment-Based Renewal of the NSF grant entitled "the Political Economy of International Trade Relations" continues the study of the formation of policies that affect international trade. The analytic approach involves formal modeling of the incentives facing politically motivated elected representatives, and the actions taken by special interest groups in pursuit of particularlistic benefits. The ongoing research concentrates in three main areas. First, it examines the dynamics of trade policy in response to a one-shot change in the terms of trade and to recurring shifts in comparative advantage. The analysis incorporates politicians who have short-time horizons and who cannot commit the future course of trade policy. Second, it studies the design of political rules and institutions, both domestic and international, that can promote more efficient trade policy outcomes. Finally, it integrates this work and related research on the political economy of trade policy, in the form of an integrative monograph covering a range of topics and approaches. Recent public debate over trade policy has pitted environmentalists against free trade interests. The previous work by the investigators demonstrated that there is no presumption that trade liberalization will be harmful to the environment. In this project the investigators examine the political economy of the interaction between different policy issues. Suppose that environmentalists expect that environmental standards at home will be looser if trade is freer than if trade barriers protect special interests in the import-competing industries. Then the environmentalists might support protection in order to secure stricter standards and prevent "downward harmonization," even if trade protection is not directly in their own interest.