Michael Lusztig, associate professor of political science at Southern Methodist University, is the author of Risking Free Trade.
Conventional wisdom holds that free trade is economically beneficial to nations. But this does not prevent industries and interest groups from lobbying their governments for protection, which creates a fear of electoral backlash among politicians hoping to promote free trade. The Limits of Protectionism demonstrates how governments can attain those economic benefits while avoiding the political costs.
Michael Lusztig’s theoretical model focuses on a process by which protectionists can be pushed to restructure and compete in a global economy. In this process, a small cutback in domestic protection leads to lost market shares at home; producers must then turn to overseas exports, and, as the size of foreign profits grow, former protectionists become active advocates for more and greater free trade opportunities.
In a wide-ranging array of case studies—from nineteenth-century Britain to Depression-era United States to contemporary New Zealand, Australia, Brazil, Canada, Chile, and Mexico—Lusztig reveals that, if skillfully handled, governments can eliminate the obstacles to free trade and enjoy continued economic growth without fear of protectionist groups seeking revenge at the ballot box.
There are few issues as politically explosive as the liberalization of trade, as recent controversies in the United States, Canada, and Mexico have shown. While loosening trade restrictions may make sense for a nationÆs economy as a whole, it typically alienates powerful vested interests. Those interests can exact severe political costs for the government that enacts change. So why accept the risk?Michael Lusztig contructs a model to determine why and under what conditions governments will take the free trade gamble. Lusztig uses his model to explain shifts to free trade in four cases: BritainÆs repeal of the Corn Laws; the United StatesÆ enactment of the Reciprocal Trade Agreements Act (1934); CanadaÆs decision to initiate continental free trade with the United States in 1985; and MexicoÆs decision to pursue the North American Free Trade Agreement (NAFTA) in 1990.