Why federalism matters: policy feedback, institutional variation and the politics of trade policy-making in Canada and Germany

Sub-federal units in federal systems increasingly participate in international trade policy-making, a domain that historically represents an exclusive jurisdiction of the federal level. A first strand of research emphasised exogenous factors, most notably the changing scope and depth of trade agreements and social contestation, to explain this trend. This study, by contrast, contributes to more recent efforts that focus on endogenous factors to elucidate variation in terms of how and with what implications sub-federal units have entrenched themselves in trade policy governance. The paper makes two contributions. First, it introduces a new theoretical argument suggesting that ideational and institutional feedback effects can explain variation in sub-federal trade policy-making. Second, the paper tests this framework by using two contrasting cases of federalism: Canada and Germany. The study shows that in Canada intergovernmental institutions facilitating sub-federal participation in trade policy-making had to be created through layering, while in Germany existing institutions were activated through conversion. Although both patterns of institutional change have empowered sub-federal units, they differ in terms of their robustness.