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Trade Wars and Trade Talks

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  • Grossman, Gene
  • Helpman, Elhanan

Abstract

Whether governments clash in trade disputes or negotiate over trade agreements, their actions in the international arena reflect political conditions back home. Previous studies of cooperative and non-cooperative trade relations have focused on governments that are immune from political pressures and act as benevolent servants of the public interest. Here we take a first step towards introducing domestic politics into the analysis of international economic relations. We study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups. The analysis reveals the determinants of the structure of protection in a non-cooperative trade war and in a cooperative trade agreement.

Suggested Citation

  • Grossman, Gene & Helpman, Elhanan, 1993. "Trade Wars and Trade Talks," CEPR Discussion Papers 806, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:806
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    More about this item

    Keywords

    Political Economy; Tariff Wars; Trade Negotiations; Trade Policy;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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