Trade Policy Transitions: Three Eras of U.S. Trade Policy

49 Pages Posted: 29 Apr 2022

See all articles by T. Renee Bowen

T. Renee Bowen

University of California, San Diego; National Bureau of Economic Research; Center for Commerce and Diplomacy (CCD)

J. Lawrence Broz

University of California, San Diego (UCSD) - Department of Political Science; Center for Commerce and Diplomacy

B. Peter Rosendorff

New York University (NYU) - Wilf Family Department of Politics

Date Written: February 18, 2022

Abstract

We analyze major transitions in U.S. trade policy using a two-factor, two-good, two-country model, where domestic policy is the outcome of political bargaining between two parties representing each factor owner—globalists and protectionists. The dominant party sets the agenda, but parties must agree to any change from the status quo. When domestic and foreign status quo tariffs are low, and in the absence of transfers, the protectionist agenda-setter will offer high tariffs, agreed to by globalists in exchange for a share of tariff revenue—as was the case when the Republicans initiated the “Era of Restriction" after the Civil War. When the status quo trade policy is high unilateral (and foreign) tariffs, e.g., U.S. 1860-1931, a free trade bargain is available only if accompanied by sufficiently high domestic transfers to the protectionists. In the 1930s, the globalist Democratic party offered the protectionist Republican party transfers to replace the benefits of the tariff, ushering in the "Era of Reciprocity with Redistribution." When transfers are too low, a consensus emerges for a "Retreat" from free trade, especially in the face of rising imports. We conclude that the recent rise of China as an exporter of capital-intensive manufactures is not sufficient to explain the unilateral imposition of tariffs by the U.S. beginning in 2018; domestic social transfers that are too low are also to be blamed.

Keywords: Trade policy, political economy, United States

JEL Classification: F1, F5, F6, F10, F13, F53, F55

Suggested Citation

Bowen, T. Renee and Broz, J. Lawrence and Rosendorff, Bryan Peter, Trade Policy Transitions: Three Eras of U.S. Trade Policy (February 18, 2022). Available at SSRN: https://ssrn.com/abstract=4087120 or http://dx.doi.org/10.2139/ssrn.4087120

T. Renee Bowen

University of California, San Diego ( email )

9500 Gilman Drive #0519
La Jolla, CA 92093-0519
United States

HOME PAGE: http://https://sites.google.com/site/tamarareneebowenlyn/

National Bureau of Economic Research ( email )

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Cambridge, MA 02138
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Center for Commerce and Diplomacy (CCD) ( email )

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La Jolla, CA 92093

HOME PAGE: http://https://ccd.ucsd.edu/

J. Lawrence Broz (Contact Author)

University of California, San Diego (UCSD) - Department of Political Science ( email )

9500 Gilman Drive
Code 0521
La Jolla, CA 92093-0521
United States

HOME PAGE: http://pages.ucsd.edu/~jlbroz/

Center for Commerce and Diplomacy ( email )

9500 Gilman Dr., 0519
La Jolla, CA 92093-0519
United States
8588225750 (Phone)

HOME PAGE: http://ccd.ucsd.edu/

Bryan Peter Rosendorff

New York University (NYU) - Wilf Family Department of Politics ( email )

19 West 4th St.
2nd Floor
New York, NY 10012
United States

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