Working Paper: CEPR ID: DP12703
Authors: Dani Rodrik
Abstract: As trade agreements have evolved and gone beyond import tariffs and quotas into regulatory rules and harmonization, they have become more difficult to fit into received economic theory. Nevertheless, most economists continue to regard trade agreements such as the Trans Pacific Partnership (TPP) favorably. The default view seems to be that these arrangements get us closer to free trade by reducing transaction costs associated with regulatory differences or explicit protectionism. An alternative perspective is that trade agreements are the result of rent-seeking, self-interested behavior on the part of politically well-connected firms – international banks, pharmaceutical companies, multinational firms. They may result in freer, mutually beneficial trade, through exchange of market access. But they are as likely to produce purely redistributive outcomes under the guise of “freer trade.”
Keywords: Free Trade Agreements
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade agreements (F13) | Redistributive outcomes (D63) |
| Trade agreements (F13) | Empower rent-seeking interests (D72) |
| Trade agreements (F13) | Exacerbate inequalities (I24) |
| NAFTA (F15) | Minimal net efficiency gains for the U.S. economy (D61) |
| Trade agreements (F13) | Adversely affect wages for certain worker groups (J79) |
| Trade agreements (F13) | Regulatory harmonization (L51) |
| Trade agreements (F13) | Ambiguous outcomes for broader social welfare (D69) |