What forces drive political conflict over trade policy and other international economic policies? Recent scholarship has explored a wide variety of political factors ranging from great power competition, industrial policy, and development strategy to partisanship, populism, and public opinion. Every Firm For Itself, a superb new book by Mary Anne Madeira, makes a sustained case that understanding trade politics requires a clear and nuanced understanding of underlying trade patterns. The fundamental economics of trade define the terrain on which political battles over trade are fought. They shape the interests and power of nearly every actor that meaningfully affects trade policy formation. And crucially, the nature of international trade patterns is changeable over time. Trade in the twenty-first century looks very different from trade at the beginning of the post-war era let alone earlier eras. In particular, Every Firm for Itself argues that trade politics has been fundamentally altered by the rise of intra-industry trade. Intra-industry trade occurs where an industry both exports and faces import competition at the same time. Exports and imports coinciding in this way do not fit with traditional models of comparative advantage. The book provides excellent examples of where intra-industry trade is driven by consumers’ desire for product variety (e.g., automobiles) or variation in product quality (e.g., footwear) or even by firms’ spreading their production processes across multiple countries (e.g., airplane parts). It also provides striking new calculations on the growth of intra-industry trade over time and across countries, showing how intra-industry trade dramatically expanded from 1960 to 2000, though its extent is variable across both countries and industries.
Iain Osgood (Wed,) studied this question.