Society-centred approach
Factor model: urban-rural and class conflict: who wins, and who loses ?
which group will organize together to lobby for or against trade ?
Heckscher-Olin model (H-O model): 1933 = comparative advantage
a country exports goods that use it’s abundant factor intensively,
and imports goods that use it’s scarce factor intensively.
Stolper-Samuelson theorem: 1941 = political divide along factor lines = class lines
Trade benefits the owners of the abundant factor = winners
Trade disadvantages the owners of scarce factor = losers
Trade and Coalitions (Rogowski): 1989
Prediction of political coalitions based on the Stolper-Samuelson theorem
LAND-LABOUR RATIO
High Low
ADVANCED Abundant: capital, land Abundant: capital, labour
ECONOMY Scarce: labour Scarce: land
Class cleavage Urban-rural conflict
Capitalism Radicalism
BACKWARD Abundant: land Abundant: labour
ECONOMY Scarce: capital, labour Scarce: capital, land
Urban-rural conflict Class cleavage
Populism Socialism
Sector model: import-competitors, exporters, importers = sector-specificity
Ricardo-Viner model
Some factors are specific to a certain sector = no factor-mobility
Winners/ losers of trade follow industry lines, not class-lines
Winners = capital and labour employed in export-oriented industries = liberalists
Losers = capital and labour employed in import-competing sectors = protectionists
“Meta-model” between factor and sector model: Hiscox, 2001:
Level of inter-industry factor mobility is key
mobile factors between industries = income effects of trade divide along class lines
immobile factors between industries = income effects of trade divide along sectoral lines
Firm-level: IIT, GVCs and individual firm lobbying
Import-dependent firms: rely on imports as immediate inputs for their production or finished products to
(re)sell. Rise of GVC’s => import-dependent firms become important in lobbying over liberalization of trade
policy (Eckhardt & Poletti, 2016)
Intra-industry trade: two-way trade in similar products = economies of scale + product differentiation
Firm heterogeneity = the majority of firms are small and non-exporting + less productive
competing trade preferences = undermined consensus = encouraging firms to lobby alone
lobbying = for a private good because it is firm-specific (Michael Gilligan)
ITT reallocates resources at the firm-level, not the sector level
factor-mobility loses it’s relevance in a world of ITT between similar endowed countries
, State-centred approach:
Infant-industry, state strength and industrial policy V. Multilateralism, rule enforcement, hegemony
ISI = import-subsidized industrialisation à large-scale state intervention, accumulation of debt
export-oriented industrialization à build up industries to produce for world markets
export-processing zones à selective import liberalization for industry inputs
infant-industry protection = protection for targeted sectors to compete internationally
Institutions and crises
GATT/WTO, collapse of the Appellate Body
(John & Pelc, 2018)
Countries only start a case when they are sure the are going to win it
More diffuse policies take longer to be challenged, or don’t be challenged at all
= number of countries, concentration within industries, share of members affected
(Bowns & senior, 2020)
Different perspectives US and EU on judicial way of solving conflict
US did feel like the ruling of the WTO were an attack on the US
systemic dispute in WTO à US claims others are free-riding on their public good efforts
sovereignty argument
“appeal into the void” - trick
Broader tension in WTO: principle of reciprocity V. principle of SDT (special differentiated treatment)
Rise of Brazil, India and China, coalition-building, reciprocity
(Hopewell, 2018): Different paths to power
over-emphasizing on economic might (China = follower )
Brazil and Indonesia => pro-active agenda setting role: mobilization, coalition-building + experience
Inner circle turning point à successful developing-country coalition by issue-specific focus and unity
unwilling coalition but strategic incentives to do so
coalition-based power V. economic-based power = shift in power dynamics of WTO
(Author, 2016): China shock
What is the impact of large trade shocks on the US labour market?
We expect: gains from trade offset the loses due to factor mobility
but, high adjustment costs and transition period (higher than expected): low mobility of labour
firm level heterogeneity linked to regional effects of trade shock + voting patterns
people moved jobs but remain in vulnerable sectors
Factor model: urban-rural and class conflict: who wins, and who loses ?
which group will organize together to lobby for or against trade ?
Heckscher-Olin model (H-O model): 1933 = comparative advantage
a country exports goods that use it’s abundant factor intensively,
and imports goods that use it’s scarce factor intensively.
Stolper-Samuelson theorem: 1941 = political divide along factor lines = class lines
Trade benefits the owners of the abundant factor = winners
Trade disadvantages the owners of scarce factor = losers
Trade and Coalitions (Rogowski): 1989
Prediction of political coalitions based on the Stolper-Samuelson theorem
LAND-LABOUR RATIO
High Low
ADVANCED Abundant: capital, land Abundant: capital, labour
ECONOMY Scarce: labour Scarce: land
Class cleavage Urban-rural conflict
Capitalism Radicalism
BACKWARD Abundant: land Abundant: labour
ECONOMY Scarce: capital, labour Scarce: capital, land
Urban-rural conflict Class cleavage
Populism Socialism
Sector model: import-competitors, exporters, importers = sector-specificity
Ricardo-Viner model
Some factors are specific to a certain sector = no factor-mobility
Winners/ losers of trade follow industry lines, not class-lines
Winners = capital and labour employed in export-oriented industries = liberalists
Losers = capital and labour employed in import-competing sectors = protectionists
“Meta-model” between factor and sector model: Hiscox, 2001:
Level of inter-industry factor mobility is key
mobile factors between industries = income effects of trade divide along class lines
immobile factors between industries = income effects of trade divide along sectoral lines
Firm-level: IIT, GVCs and individual firm lobbying
Import-dependent firms: rely on imports as immediate inputs for their production or finished products to
(re)sell. Rise of GVC’s => import-dependent firms become important in lobbying over liberalization of trade
policy (Eckhardt & Poletti, 2016)
Intra-industry trade: two-way trade in similar products = economies of scale + product differentiation
Firm heterogeneity = the majority of firms are small and non-exporting + less productive
competing trade preferences = undermined consensus = encouraging firms to lobby alone
lobbying = for a private good because it is firm-specific (Michael Gilligan)
ITT reallocates resources at the firm-level, not the sector level
factor-mobility loses it’s relevance in a world of ITT between similar endowed countries
, State-centred approach:
Infant-industry, state strength and industrial policy V. Multilateralism, rule enforcement, hegemony
ISI = import-subsidized industrialisation à large-scale state intervention, accumulation of debt
export-oriented industrialization à build up industries to produce for world markets
export-processing zones à selective import liberalization for industry inputs
infant-industry protection = protection for targeted sectors to compete internationally
Institutions and crises
GATT/WTO, collapse of the Appellate Body
(John & Pelc, 2018)
Countries only start a case when they are sure the are going to win it
More diffuse policies take longer to be challenged, or don’t be challenged at all
= number of countries, concentration within industries, share of members affected
(Bowns & senior, 2020)
Different perspectives US and EU on judicial way of solving conflict
US did feel like the ruling of the WTO were an attack on the US
systemic dispute in WTO à US claims others are free-riding on their public good efforts
sovereignty argument
“appeal into the void” - trick
Broader tension in WTO: principle of reciprocity V. principle of SDT (special differentiated treatment)
Rise of Brazil, India and China, coalition-building, reciprocity
(Hopewell, 2018): Different paths to power
over-emphasizing on economic might (China = follower )
Brazil and Indonesia => pro-active agenda setting role: mobilization, coalition-building + experience
Inner circle turning point à successful developing-country coalition by issue-specific focus and unity
unwilling coalition but strategic incentives to do so
coalition-based power V. economic-based power = shift in power dynamics of WTO
(Author, 2016): China shock
What is the impact of large trade shocks on the US labour market?
We expect: gains from trade offset the loses due to factor mobility
but, high adjustment costs and transition period (higher than expected): low mobility of labour
firm level heterogeneity linked to regional effects of trade shock + voting patterns
people moved jobs but remain in vulnerable sectors
