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International Trade and Political Institutions

Instituting Trade in the Long Nineteenth Century

Fiona McGillivay, Iain McLean, Robert Pahre and Cheryl Schonhardt-Bailey

International Trade and Political Institutions broadens the public choice theory of trade politics to allow for the study of ideas and institutions within a longer time horizon. The authors use theoretically rigorous historical analysis of international political economy and four important case studies to help untangle the role of ideology, institutions and interests. This illuminating book connects the fields of economics, political economy and history to shed new light on trade theory.
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Chapter 3: Trading Free and Opening Markets

Fiona McGillivay, Iain McLean, Robert Pahre and Cheryl Schonhardt-Bailey


Fiona McGillivray One theme of this volume is how institutions structure political conflict over trade policy. Institutions affect who makes the decisions and what motivates them. Therefore, an institutional change can lead to a radical alteration in policy. Since trade is a two-way exchange, such institutional change within one partner can affect the entire nature of trading relationships. Institutional changes in one nation can have trade policy repercussions throughout its trading partners.1 The Reciprocal Trade Agreements Act of 1934, for example, was an institutional change that delegated authority for negotiating tariffs from Congress to the President. This legislative rule change in the USA not only helped liberalize US trade, it helped liberalize world trade (Bailey, Goldstein and Weingast, 1997). In this chapter, I take a step further back in US history to focus on an earlier institutional change; one that also restructured conflict over trade policy within the USA and influenced foreign nations’ trade policy. In 1783, at the end of the revolutionary war, the USA was a loose confederation of 13 states. When the USA switched from the Articles of Confederation to the Constitution in 1789, authority for interstate and foreign trade shifted from decentralized political control – 13, largely independent and autonomous states – to centralized political control – a Federal Congress.2 It was anticipated that this rule change would alter the asymmetric nature of trading relationship between the US states and Britain. A common external tariff would create the bargaining leverage US states needed...

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