Market Structure, Electoral Institutions, and Trade Policy

The view that intra-industry trade is politically easier to liberalize than inter-industry trade is widely held and potentially explains key features of the global trading system. This view, however, rests on weak theoretical and empirical foundations. I argue that intra-industry trade can in fact lead to higher protection, but only where electoral institutions privilege narrow protectionist interests. I support this hypothesis with an analysis of trade barriers in 4,400 sectors in 65 countries and an analysis of lobbying in the US. My results imply that scholars should stop invoking intra-industry trade as an explanation for low trade barriers in wealthy countries and advanced manufacturing sectors. They also have important implications for the more general relationship between political institutions, collective action, and policy outcomes.