Trade Adjustment in Autocracies: Social Compensation and PTA Design

• In Event: IPE and Authoritarianism

Abstract

Domestic adjustment to trade-induced social dislocation is a notorious policy challenge worldwide. Traditionally , states increase social spending as they form preferential trade agreements (PTAs) in order to compensate workers in import-competing industries whose jobs become threatened. Yet research on trade policy adjustment has primarily focused on democratic nations in the OECD, leaving autocratic countries largely unexplored even as they form PTAs frequently. In this study, we address this void in the literature by investigating how autocratic states support the vulnerable domestic populations following the formation of PTAs. While earlier studies suggest that autocratic states are less likely to pursue compensation through social spending to ease globalization pressures, leaders in these countries still have considerable incentive to minimize the social and political disruptions that can stem from economic openness. Within this context, we theorize that autocratic regimes are less inclined to provide extensive social spending in response to their formation of PTAs, as doing so would require progressive tax and redistribution regimes not favored by the relatively well-off selectorates that provide regime support in these nations. Instead, autocratic regimes use PTA-based measures, such as the inclusion of labor protection and labor mobility clauses, to reduce the trade-based job loses that would otherwise occur. These clauses, originally promulgated by the Global North, are favored by autocratic leaders joining PTAs with both democratic and autocratic nations alike. Thus, the diffusion of PTA templates can serve the political needs of corrupt rulers by buying support among workers. Importantly, autocratic PTAs are resistant to the diffusion of other social, environmental and anti-corruption clauses that could threaten regime stability. We test corresponding hypotheses quantitatively using data from the Design of Trade Agreements (DESTA) dataset. We also carry out interviews with trade officials to assess our theoretical mechanism.

Authors

• Jonas Gamso, Arizona State University

• Evgeny Postnikov, University of Melbourne