Cooperation in Hard Times: Self-Restraint of Trade Protection

June 2016
With Krzysztof Pelc; Journal of Conflict Resolution (forthcoming)

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Hard times give rise to greater demand for protection, but also amplify the negative consequences of such defections, given the risk of drawing retaliation from abroad that could worsen economic conditions. International trade rules include provisions that allow for raising barriers to aid industries in crisis even while urging restraint in their use. How do states balance these conflicting pressures? This article assesses the effect of crises on cooperation in trade, by looking at whether the prospect of a spiral of defection precisely at a time when such spirals are most costly leads to restraint by states. Our contribution is to analyze variation among crises in terms of their prevalence among countries. We hypothesize that governments impose less protectionism during economic crisis when their economic troubles are widespread than when a country faces crisis in isolation. Under conditions of shared hard times, states exercise restraint in their reliance on beggar-thy-neighbor policies. Empirical evidence from analysis of industry level data on protection measures for the period from 1996 to 2010 provides support for our claims.