Made for Trade

European Economic Review, Vol. 49, No. 6, August 2005, Amsterdam

The world’s trade ministers might be forgiven for polishing up their résumés. As accustomed as these negotiators must be to disappointment, their jobs seem especially challenging as of late. The World Trade Organization’s meeting in Hong Kong last December yielded little progress, as talks to open global commerce further stalled over market access for agricultural goods and services protections. Politicians from Washington to Paris fret over foreign companies’ acquiring "strategic" national assets. And even the Central American Free Trade Agreement — a pact between the United States and a smattering of small Latin American economies — prompted a bitter congressional debate before squeaking through the U.S. House of Representatives last summer, 217 votes to 215.

One of the paradoxes of the global economy, however, is that even as trade agreements stumble and protectionism appears strong, international trade is booming. Global exports expanded by more than 6 percent annually during the 1990s and jumped 9 percent in 2004 alone — in both cases far outstripping economic growth.

How do you reconcile the surge of protectionist sentiment with the continued growth of trade? Economists Anna Maria Mayda of Georgetown University and Dani Rodrik of Harvard University shed some light on the question with their intriguing article "Why are some people (and some countries) more protectionist than others?" in the August issue of European Economic Review.

Drawing on two massive demographic and individual opinion surveys collected in the 1990s — the International Social Survey Programme and the World Values Survey — covering thousands of respondents in dozens of rich and poor countries, Mayda and Rodrik search for the qualities and conditions that make people favor trade or disdain it. They find that a person’s economic well-being is only one factor among many. Public attitudes on trade are also shaped by education, gender, and more elusive factors such as values, identity, and patriotism.

People working in industries that compete with foreign imports are, unsurprisingly, less inclined to be free traders than those with jobs in sectors lacking international challengers. Also, wealth and social status are linked to support for trade. "[T]rade is generally perceived to be a good thing for individuals at the high end of a country’s income distribution, and a bad thing for those at the bottom," Mayda and Rodrik write.

But other, less intuitive, factors come into play, too. Consider education and gender. In rich countries such as Germany and the United States, people with greater education tend to support free trade relative to less-educated citizens. Yet the opposite occurs in low- income nations such as Armenia, Bangladesh, and Nigeria, where more education is linked to greater protectionism. Mayda and Rodrik also point out that women are nearly 8 percent more likely than men to favor trade restrictions.

Individuals with strong ties to their neighborhoods tend to be less supportive of open trade than those lacking such attachments. Also, the greater your sense of national pride — such as 91 percent of Americans saying they’d rather be citizens of their country over any other, versus only 50 percent of the Dutch making a similar statement — the better chance that you’re protectionist on trade. The more you take pride in your country’s global influence (and here the United States tops the list as well), the less likely you are to support open trade.

Mayda and Rodrik only briefly venture beyond identifying these links into the murkier territory of explaining them, so readers less abiding of academic restraint may long for deeper speculation. For instance, why do women seem to be more protectionist than men? Other studies have found that countries that trade more actually have a smaller wage gap between men and women. And why is more education linked to greater support for trade in rich countries but not in poor ones? Perhaps, as the authors suggest, it is because trade tends to benefit those people who own more of the resources (in this case, the resource of education) with which that economy is well endowed — and rich countries are better endowed with education than poor ones. But other possibilities come to mind; in poor countries, highly educated elites may believe that they can more easily benefit from the cozy protections of a less transparent economy.

The authors do, however, tackle one very practical question: Do attitudes on trade translate into actual trade policies? "The answer is broadly yes," Mayda and Rodrik say, finding that more favorable opinions on trade are associated with lower trade restrictions.

Which brings us back to the contradiction of resurgent protectionism amid growing trade. Perhaps it’s not such a paradox after all. Think of it this way: If you’re male, well educated, and well off, you’re more likely to support free trade. But, if you consider yourself patriotic, retain strong links to your community, and think your country is No. 1, you’re more likely to support restrictions. No wonder trade ministers are so often left scratching their heads.