The research investigates important questions about public attitudes toward trade policy. Changes in trade policy lead to changes in price levels of consumer goods. When trade policy is liberalized, people who primarily consume imported or import-competing goods benefit because of decreases in prices for those goods, while people who consume exportable goods lose due to increases in prices. Because consumption patterns vary with income, the consumer price effects of changes in trade policy are distributional. The current research on mass trade preferences - focused almost exclusively on the potential income and/or employment effects of changes in trade policy - ignores these price effects. This project explores how price level effects in trade policy determine trade policy preferences at the individual level, using a nationally representative survey of the U.S. public with several embedded survey experiments to test the dynamic model of trade preferences. The project also includes interviews with U.S. economic policy-makers to better understand how the public's reaction to changes in economic conditions influences the policy-making process.
Intellectual Merits: The literature on mass preferences for globalization has focused on the issue area of trade policy and the potential income or employment effects of trade policy. Despite numerous studies, there is relatively little consensus on the extent to which the public has stable and coherent preferences over foreign economic policies. This research augments existing political economy models of trade to allow individuals to be concerned with both income and price level effects of changes in trade policy. The project provides a hypothesized mechanism through which individuals weigh these effects against each other: perceived economic insecurity. When perceived insecurity is relatively high, individuals "retreat to safety" by preferring policies that safeguard their employment and/or income. When economic insecurity is relatively low, however, individuals are more likely to favor trade policies that make the goods that they consume heavily relatively less costly. With this dynamic model of trade preferences, this research works to resolve one of the key debates in the trade policy literature in recent years and help make sense of the conflicting results that pervade the existing literature on this topic.
Broader Impacts: The research has clear and direct implications for public policy. Developing a strong understanding of how American citizens weigh the costs and benefits of living in an increasingly globalized economy is important for designing policies that maximize social welfare. Drawing on "protection for sale" models of trade policy creation, the trade policy literature often assumes that a democratic deficit exists in trade policy formation and other foreign economic policy areas. By focusing on distributional price level effects of changes in trade policy, the research will assess if this democratic deficit is as large as previously assumed.
