This project studies the formation of policies that affect international trade and the global environment. While the trade literature has devoted much attention to identifying policies that maximize aggregate welfare, relatively little effort has been made to understand what policies will emerge from a realistic political process in which policy makers must respond to the demands of both special interests and the general electorate. A political economy model has been developed in which elected officials respond to political incentives. This model will be extended and applied to consider such problems as the equilibrium structure of protection, the government's choice of trade policy instrument, the interaction between trade and environmental policies (and between the interest groups that support these two types of interventions), and the interaction between governments of different countries in both cooperative and noncooperative settings. The ultimate aim of the research is to evaluate alternative institutional "rules of the game" for the world trading system. It is hoped that rules will be identified that will facilitate a liberal trading regime with greatest mutual benefits from trade and with efficient cooperation on international environmental matters. In order to accomplish this, the theoretical framework must first be developed and refined so that emerging policy outcomes can be predicted under different possible institutional constraints.
