LECTURE 7: DOMESTIC POLITICS AND TRADE

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LECTURE 7 DOMESTIC POLITICS AND TRADE
1. Relative versus Absolute Gains 2. Models of
Protectionism a. Systemic b. Business Cycle c.
Interest Group 3. Gourevitch The Importance of
the State 5. Milner Firm Preferences
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WHICH WORLD WOULD YOU PREFER?
World 1 The Us Economy Grows by 5 Per Year and
Japan Grows by 8 Per Year for the Next Ten
Years
World 2 The Us Economy Grows by 2 Per Year and
Japan Grows by 2 Per Year for the Next Ten
Years
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RELATIVE VERSUS ABSOLUTE GAINS
1. Regime theorists Assume Absolute Gains Drive
Behavior 2. But Power Is a Relative Concept 3.
Realists Assume Leaders Concerned About Relative
Gains 4. Realists Getting to the C-C Box Is
Very Difficult
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NUMERICAL EXAMPLE OF RELATIVEVERSUS ABSOLUTE
GAINS
BENEFITS FROM A HYPOTHETICAL TRADE AGREEMENT
YEAR JAPAN US RELATIVE ------- -------- ---------
POWER 1996 50 100 100/502 BENEFIT 5
5 2000 55 105 105/551.9
REALIST CONCLUSION DO NOT SIGN THE AGREEMENT
BECAUSE IT SHIFTS THE BALANCE OF POWER IN JAPANS
FAVOR
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WHICH TYPE OF GAINS MOTIVATES LEADERS?
1. It Depends on Timing U.S.-Soviet Relations
in 1950 vs. 1973 vs. 1988 2. It Depends on the
Countries U.S. vs. Soviet Union U.S. vs.
Canada 3. It Depends on the Issue Security
Versus Economic 4. It Depends on the Leaders
Belief System The Product of Socialization 5.
Measurement Can Be Extremely Difficult Calculati
ons Biased by Belief Systems
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MODELS OF PROTECTIONISM
1. Systemic Hegemonic Stability Theory 2.
Domestic National Business Cycle 3. Interest
Group Models a. The Median Voter
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CALCULATING THE MEDIAN VOTER
Method A Add Up Power and Divide by 2 (e.g.,
680/2340) Method B Pair wise Comparison of
Alternatives (e.g., A vs B,)
KEY Think of the Median Voter as a Particular
Person
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MEDIAN VOTER
1. Strengths a. Largest Group Does Not Dictate
Policy b. State is Not Unitary Rational
Actor 2. Weaknesses a. Preferences Do Not
Always Fall on One Dimension b. Power is Often
Difficult to Calculate
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GOUREVITCH
1. Society is Composed of Many Groups
Heavy Industry Shopkeepers and Artisans Workers
in Heavy Industry Shippers Finished
Manufacturing Bankers Workers in Finished
Manufacturing Professionals Junkers Small Farmers
2. Groups Have Different Tariff Preferences
Agricultural Tariffs
Germany
High
Low
Heavy Industry
High
Workers in Heavy Industry
Industrial Tariffs
Small Farmer
Workers in Finished Manufacturing
Low
Finished Manufacturing
Junkers
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POINTS ON GOUREVITCH
1.The Outcome is Not Preferred by Any One
Group -- So Very Different from Median Voter
Model 2. Interest Groups Alone Cannot
Explain -- Access of Prussian Junker to the
Government 3. Ideology and the British Case
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MILNER FIRM LEVEL ANALYSIS
1. Further Dissaggregation The Firm 2. New
Independent Variables
Trade Preferences a. Free Trade b. Protectionism
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MILNER CONTINUED
1. Number of Multinational, Export Dependent, and
Import Dependent Firms has Grown in Last 100
Years 2. Contrary to Milners Claim, Regimes
Play a Role a. GATT Makes Reliance on Imports
Safer b. GATT Opens Markets for Exports c.
Regimes Encourage Foreign Direct Investment 3.
Evolution of the Global Economy Specialization
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PUTNAM THE TWO LEVEL GAME
U.S Government
German Government
American Societal Groups
German Societal Groups
Anti-Tariff
Pro-Tariff
America
Bargaining Space
Germany
Ideal Point
Legend
Range of Acceptable Agreement