Power Politics and the Free Trade Bandwagon

Abstract

What explains the world's newfound enthusiasm for free trade? Are government leaders integrating their economies to achieve Pareto-improving gains? Or is it because a critical mass of pro—free trade governments has acquired the capacity to “go it alone,” leaving would-be protectionists with a choice between a bad option (opening their markets at very high political cost) and an even worse alternative (incurring the still higher political costs of exclusion)? This article suggests that in practice, mutual-gains-seeking motivations are frequently dominated by defensive ones. The North American Free Trade Agreement is a case in point: Without in any way being bullied or coerced, the Mexican and Canadian governments agreed to take part in a multilateral arrangement that the evidence suggests neither much liked. Although hard to reconcile with the political economy literature's positive-sum model of international cooperation, this finding is consistent with the broader “power-politics” model introduced here.