As President Bush's plan to bring free trade to the Middle East is unveiled at the World Economic Forum meetings in Jordan June 21-23, a new study by a Brigham Young University professor finds a critical aspect to opening trade that U.S. officials can use to guide their approach.
Dan Nielson, assistant professor of political science, says developing democracies that delegate authority to a president and party leaders are more likely to open their doors to trade than others. His work is featured in the July issue of the "American Journal of Political Science," considered by political scientists as one of the top journals in the field.
The study, which comes on the heels of Bush's free trade deals with Singapore and Chile, describes a model of democratic government that is most likely to pursue free trade. Economists agree that free trade maximizes consumer benefits through lower prices, higher-quality goods and a wider variety of product choices. In the Middle East, Nielson's model could assist development of a new government for Iraqis and also aid other countries in the region progressing toward more democratic forms of government.
"Economists are great at defining why interest groups demand protectionist measures, but they have done almost nothing to explain how governments supply them," said Nielson. "It's not just a matter of what special interest groups want, but how governments respond to them."
Nielson, who is at work on a book titled "Electing to Develop," studied 18 developing nations to determine which aspects of government differentiate democracies with open trade policies from those whose markets are more restricted. Two factors that proved significant -- presidential powers and strength of party leaders -- underscore the importance of how special interest demands on government are channeled.
"This is a terrific piece of research, well deserving of its place in one of the top journals in the field, which I expect to have an immediate and broad impact on how scholars study trade policy," said Michael Thies, associate professor of political science at UCLA, who studies government delegation and policy-making. "If the U.S. government wants to encourage other countries to open up trade, and to do so in the context of overall democratization, this paper suggests that stronger presidents, larger electoral districts and stronger parties are more likely to favor free trade."
Gains from free trade are lost when politicians place tariffs or quotas on foreign goods, most commonly done to protect domestic producers. The United States currently has tariffs on Mideast goods ranging from olive oil, dates and figs to leather, carpet and clothing. Although some American producers benefit from the tariffs, American consumers lose considerably more from the resulting higher prices.
"Type of government matters when it comes to removing trade barriers," said Nielson. "You want to design a government that benefits its people the most and maintains good relations with other nations."
Nielson's model shows that tariffs decline when presidents are given line-item veto power and authority to negotiate trade deals. The U.S. Congress granted President Bush trade-promotion authority in August 2002, which he subsequently applied to make the agreements with Singapore and Chile. Because presidents serve nationwide constituencies, Nielson said, they have more incentive to pursue policies beneficial to all citizens and less incentive to favor narrow segments of the population.
Openness of trade also depends on the degree to which political systems are candidate-centered or party-centered. Tariffs decline when politicians delegate authority to party leaders, who unlike individual legislators, have an obligation to all party members. Trade protection rises in candidate-centered systems when politicians rely more exclusively on campaign funding from special interests.
"This research helps explain why policymakers often ignore the benefits of free trade to consumers," Nielson said. "Free trade requires that leaders do business differently, that they step away from the 'old boys' politics and move toward more modern politics."
Writer: Joseph Hadfield