The Political Representation of Weak Interests: Big Retail, Consumers, and Trade Liberalization

• In Event: Policy, Taxation and Welfare

Abstract

This project develops and tests a new theory of trade liberalization. The argument is simple and novel: over the course of the twentieth century the retail sector was transformed from a sector comprised of a large number of small establishments to one dominated by a few behemoths. Unlike their small and numerous predecessors, these huge new corporations (like Walmart, Amazon, and Carrefour) had the motive to lobby for lower trade barriers because they would individually benefit from the higher demand, revenues, and profits that came from cheaper imports, as well the means to translate this motive into real political influence. Our explanation addresses a central puzzle in scholarship on the politics of international trade. Concentrated interest groups seeking protection from import competition have the incentive and capability to lobby for favorable economic policy, while consumers, the hypothetical beneficiaries of free trade and cheaper imports, are often dispersed and numerous. Yet, the last two decades of the twentieth century were a period of falling tariffs and sustained growth in world trade. In light of the logic of collective action, how can we explain these trends? We argue that the emergence of a powerful and concentrated interest group with a strong preference for lower-priced imports - Big Retail - helped to solve the collective action problem for dispersed consumers. We assemble several complementary pieces of qualitative and quantitative data to support our hypothesis, drawing on import patterns, concentration data, public statements, cross-national observational evidence, and a within-district event study analysis in the United States, which shows that a greater presence of big retail (as measured by the presence of Walmart stores) generates a substantively significant increase in the likelihood of Congresspeople voting in favor of free trade agreements.

Authors

• Gautam Nair, Harvard University

• Owen Bernstein, Harvard University