Shopping for Protection: The Politics of Choosing Trade Instruments in a Partially Legalized World

Abstract

This article investigates the conditions under which states use General Agreements on Tariff and Trade (GATT) ⁄ World Trade Organization (WTO) legal measures rather than bilateral or unilateral instruments to protect domestic industries. Contrary to the conventional wisdom that international trade has become increasingly legalized and multilateralized, we demonstrate that domestic electoral politics loom large in a state’s decision to resort to international law. Legislators’ need to mobilize votes and campaign donations and the electoral systems had substantial effects on the government’s choice to use GATT ⁄ WTO compliant protection among a wide array of protectionist instruments. The article tests this argument using new commodity-level data on trade instrument choice (subsidy, voluntary export restraints [VERs], and GATT ⁄ WTO legal measures) from the second largest economy that has experienced major electoral reform, Japan. The results lend strong support to our argument. Higher electoral competition is associated with the likelihood of using VERs and the electoral reform of 1994 was a force behind the sudden surge of legislators’ interests in using WTO legal safeguard measure. The article finds, moreover, legislators strategically deviate from the new WTO rules, such as prohibition of VERs, when it is electorally beneficial to do so. The General Agreements on Tariff and Trade (GATT) and its successor World Trade Organization (WTO) set out common legal rules on the use of trade protection by permitting some instruments (e.g., antidumping or escape clause protection) while prohibiting others (e.g., voluntary export restraint agreement under WTO). Conventional wisdom in the legalization literature suggests that member states’ choice of protectionist instruments should converge toward GATT ⁄ WTO compliant protection because legal rules either raise the costs of using alternative instruments or diffuse norms and expectations among member