Is There a Way Back? On the Political Economy of Liberalizing Trade

Luca Bettarelli, Julia Estefania Flores, Davide Furceri, Jonathan D. Ostry and Loredana Pisano

No 21493, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies the political effects of trade liberalization using a global panel of 130 countries over the period 2000–2021. By linking detailed tariff and non-tariff measures to an opinion-based indicator of political support, it estimates short- and medium-term impacts using local projections. The findings reveal a clear asymmetry: tariff reductions reduce incumbents’ political support, while non-tariff liberalization has neutral or mildly positive effects. The political costs of reforms are larger under adverse economic conditions—such as recessions, high unemployment, or heightened financial stress—in more unequal societies, and in countries with weaker external positions, such as those running trade deficits. These costs are also amplified when reforms occur close to elections, but largely disappear in periods of high uncertainty, consistent with weaker electoral accountability under heightened informational frictions.

Keywords: Trade; Trade policy; Political support; Local projections; Non-tariff barriers; Structural reforms; Political economy (search for similar items in EconPapers)
JEL-codes: D72 J65 L43 L51 O43 O47 P16 (search for similar items in EconPapers)
Date: 2026-05
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