POLI 12 Lecture Notes - Lecture 14: World Trade Organization
Lecture 14:
Collective Action Problems:
• Costs of barriers diffuse across consumers, can bee small at individual level.
• Benefits are concentrated for import competing industries
• Lobbying advantages present but depend on politics:
1. Democracy vs Autocracy, democratic leaders want to be reelected and the voters could
potentially swing voters. Autocracies
2. Federalism, locally concentrated interests can carry more weight
Strategic Interaction:
• Design trade policies in anticipation of other players’ actions
• If you liberalize your trade tariffs but other cheat, by subsidizing their exports, your workers could
be hurt
• Cooperation would bee ideal but its difficult for countries to credibly signal that they will
reciprocate
Overcoming Cooperation Problems:
• Small numbers make compliance easier to monitor, you get a hegemonic stability.
• Repeated interaction, fear of souring future deals
• Trade agreements can:
• Provide terms of cooperation
• Stipulate punishments for defection
• Increase information sharing
• Lengthen the shadow of the future
WTO:
• Countries must report any trade barriers they enact
• Panels of experts to define cheating
• Tribunal imposes sanctions on states that cheat
• But WTO effectively reflects preferences of powerful states
The US and Europe protect agriculture, blocking negotiations due to lobbying and the effects of
voting
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