Economic risk and the politics of protectionism

Sherry Quiñones and Scott Gates

International Interactions, 1995, vol. 21, issue 1, 63-83

Abstract: Numerous scholars continue to search for explanations to account for the rise of protectionist trade practices by some nation‐states. Recent work has sought to formally link the notion of economic risk with the rise in barriers to free trade. This class of models examine what trade policies are optimal under different conditions arising from changes in the world economy. Generally speaking, unexpected fluctuations in the world economy place some nation‐state's domestic economies at risk. Specifically, risk has the potential to affect the economic well being of various domestic groups who subsequently demand protection. These demands, if met, are usually mitigated by the manipulation of trade policies that prove to be suboptimal for international free trade. Existing research has several notable shortcomings. First, most studies tend to focus on normative questions concerned with determining the type of trade strategies nation‐states should pursue when they confront risk. However, this research neglects the political dimension of risk. Policy options available to mitigate the effects of risk, which are optimal in economic terms, may not be optimal politically. We suggest that the decision process involved in determining what type of policy to pursue is inherently political. This research begins to uncover the political dimensions of this process by developing an explanation for governmental responsiveness to risk conditions. Secondly, most studies do not empirically verify their assertions. With the exception of Bates et al. (1991), few empirical studies exist on this topic. This paper seeks to address these theoretical and empirical deficits by (1) delineating the political dimension of risk in order to derive a theoretical explanation that accounts for risk and explains why nation‐states may find it in their best interest to pursue protectionist trade policy strategies and (2) provide an empirical test of the relationship between risk and trade among a small sample of countries. Building upon previous research by Bates et al. (1991), we operationalize economic risk to reflect the instability of a nation‐state's terms‐of‐trade in the international economy. We then seek to determine what nation‐states are most vulnerable to economic risk. Subsequently, we test whether countries most vulnerable to risk have a higher propensity to impose barriers to free trade. Lastly, we test to see what effect the availability of governmental resources have on a nation‐state's propensity to adopt a free trade policy orientation.

Date: 1995
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DOI: 10.1080/03050629508434860

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