The Trade-Agreement Embarrassment

The dominant academic literature about trade agreements maintains that they are only about national terms-of-trade manipulation and not at all about purely political concerns. Non-academic economists, commentators, and diplomats by contrast think that trade agreements are all about political concerns. There are two substantive and important distinctions between the two views. i Practitioners maintain that policymakers care virtually not at all about the terms of trade or about trade-tax revenue. ii Practitioners, unlike academics, maintain that trade-agreement negotiations themselves change the underlying political economy. Observation of actual trade policy measures, though not conclusive, suggests that the practitioners are right and that the academics are wrong.