Negotiating Trade

If unilateral free trade is the best policy, then why are international treaties needed to achieve it? The reason may be found in the Becker theory of competition among political pressure groups. By entering wide-ranging negotiations, nations shift the political question from one of protecting a single industry to one of protecting many industries. This makes it less likely that a narrow interest in favour of protection will prevail over the general national interest in favour of free trade. Economy-wide negotiations frame the question of free trade versus protection in a way that favours free trade. Although Becker’s theory points to an inherent bias in favour of the political success of economically efficient policies, the force of his theory is most evident in the possibly rare instances in which that bias is in fact overcome. Two examples are the special conditions attaching to Japan’s accession to the GATT and the US protectionist response to Japan’s rising imports.