Mark S. Manger

 

On his book Investing in Protection: The Politics of Preferential Trade Agreements between North and South

Cover Interview of February 15, 2010

A close-up

I’ve developed an analytical framework in which politicians and bureaucrats mainly respond to demands from economic interest groups in deciding trade policy.  Institutions and culture do matter, but only idiosyncratically.  Ultimately, it is economic self-interest that plays out in the political arena.

The book traces the pattern of the negotiation of several trade agreements.  The substantive chapters devote much space to the political struggles that ultimately define the design of an agreement.  Trade policy seems like a dry subject, but for the people involved, livelihoods are at stake, giving the process a surprisingly colorful and emotional character.  Political action ranges from sit-ins in front of Japanese Ministries to attempted self-immolation by Korean farmers to the heartwarming invitation offered to trade bureaucrats to visit a pig farm to see the plight of farmers with their own eyes.

The Japanese cases are particularly interesting.  Their first trade agreement was signed with Singapore, who conveniently had almost no trade barriers.  And yet, even here, agricultural protectionism almost led to a failure of the negotiations, because Singapore exports aquarium goldfish.  Although the negotiations with Singapore were just supposed to be a gentle trial run, they already foreshadowed the intense resistance that an FTA with Mexico would run into.  The sensitive issue is almost always agriculture.  But given the asymmetries between the partners—Mexico still needed Japanese investment more than Japan needed Mexico as a production site—the most competitive exports from the developing country are often excluded from the deal.

Clearly, preferential trade agreements are often brought about at the behest of a very narrow range of actors.  The EU-Mexico agreement was first and foremost a deal to protect the interests of one multinational firm—Volkswagen—and its chain of suppliers. Volkswagen is not only an industrial giant in Europe, but also one of the biggest employers in Mexico.  Although present in Mexico since the 1960s, the company found itself at a severe disadvantage once NAFTA had come into force.  Mexico had previously offered a variety of tariff benefits to foreign manufacturers, but in the NAFTA negotiations, US trade officials had managed to have all of these banned and new barriers erected.  The primary targets were Japanese and European manufacturers.  Volkswagen supported an FTA to counter these measures, and largely succeeded.  But neither European nor Mexican exporters gained much additional access to the other’s market.

The characters that emerge as heroes in these cases are often the developing countries’ negotiators.  Chilean and Mexican trade officials can hold their own against any highly-paid Washington lawyer or école nationale—trained European Commission official.  Nonetheless, what they can achieve is severely limited by their country’s relative position in the global economy.