The Strategic Use of Tariff Phaseouts in US Trade Agreements

• In Event: Poster Session: Legislative Studies & American Political Economy
  In Poster Session: Poster Session: American Political Economy

Abstract

Free Trade Agreements (FTAs) improve aggregate welfare and produce electoral dividends for executives; however, they also impose distributive impacts, particularly on industries concentrated in electorally significant regions, thus introducing electoral risks. This study explores how political leaders navigate the domestic objections and electoral repercussions associated with free trade policies. I propose that executives employ tariff phaseouts strategically, using them as a precise instrument intended to temporarily protect domestic industries from the surge of foreign imports while advocating for the rapid elimination of foreign import tariffs to benefit domestic exporters. This approach serves a dual purpose: it mitigates protectionist backlash at the polls and enhances the likelihood of FTA ratification. An analysis of six Bush-era FTAs supports most of the predictions. Key findings reveal that President Bush strategically allocated more tariff phaseouts to insulate domestic industries in swing states and core counties in swing states, particularly during election years, with a noted decrease in his second term. Both copartisans and moderate House members received enhanced FTA benefits compared to senators, although copartisans saw reduced benefits in President Bush's second term. This research seeks to better understand the domestic political economy that underpins FTA negotiations, shedding light on a mechanism that has enabled a remarkable proliferation of FTAs over the past two decades, despite inherent domestic challenges.

Author

• Eric Thai, UC San Diego