The New Politics of the New Trade: the Political Economy of Intra-Industry Trade

Abstract

This dissertation explores the relationship between intra-industry trade and domestic trade politics in developed economies. I develop a theory of the political effects of this fast-growing and undertheorized type of trade, and I advance two key arguments. First, I argue that intra-industry trade undermines the traditional domestic political coalitions over trade that are predicted by classic theories of trade politics. I argue that as broad coalitions become more difficult to maintain, individual firms in industries subject to high levels of intra-industry trade become more politically active, lobbying alone for their preferred trade policies. Second, I argue that intra-industry trade incentivizes lobbying not only by firms seeking protection, but also by exporters seeking liberalization. To develop my theory, I consider the economics of intra-industry trade, relying on the literature in economics known as `new trade theory.' In Chapter 2, I discuss the economic sources and distributional effects of intra-industry trade, from which I derive my hypotheses about political implications. In Chapter 3, I present my model of the effects of intra-industry trade on preferences, trade coalitions, and lobbying activity over trade. In Chapter 4, I examine the role of intra-industry trade in shaping the structure of trade policy coalitions in the United States. I test my arguments using firm-level lobbying data for US manufacturing industries. In Chapter 5, I link my findings in Chapter 4 to trade policy outcomes. I develop hypotheses about the way that changes in lobbying and trade coalitions are likely to affect resulting levels of protection in OECD economies. I test these hypotheses quantitatively with cross-national data, finding that industries with higher levels of intra-industry trade tend to enjoy more liberal trade. In both of these chapters, I find support for my arguments about the effects of intra-industry trade on trade policy coalitions and firm lobbying activity. This dissertation contributes to our understanding of how international trade affects domestic politics and societal demands for liberalization or protection.