Optimal Obfuscation: Democracy and Trade Policy Transparency

A growing body of research shows that democracies have more liberal trade policies than do autocracies. I argue, in contrast, that democracy has contradictory effects on different types of trade policies because electoral competition generates more information about some than about others. It generates considerable information about policies whose effects on consumer welfare are easy to explain to voters, but less information about policies whose effects are more complex. By increasing the transparency of some policies relative to others, democracy induces politicians to reduce transparent trade barriers but also to replace them with less transparent ones. I test this hypothesis by examining the impact of democracy on tariffs, “core” nontariff barriers (NTBs) such as quotas, and “quality” NTBs such as product standards in 75 countries in the 1990s. I find that democracy leads to lower tariffs, higher core NTBs, and even higher quality NTBs. I conclude that democracy promotes “optimal obfuscation” that allows politicians to protect their markets while maintaining a veneer of liberalization.