Positive Feedback: The Impact of Trade Liberalization on Industry Demands for Protection

Abstract

Contrary to widely accepted theories of interest-group demand for protection, industries that experience high and rising import competition after a reduction in trade barriers often become less rather than more protectionist in the long term. To unravel this paradox, I propose and test a theory that explains variation in domestic producer groups' demand for protection over time. This model of industry behavior suggests that trade liberalization has a “positive feedback” effect on the policy preferences and political strategies of domestic industries, compelling them to adjust to more competitive market conditions and thereby reducing their future demand for protection.