Democratic Convergence and Free Trade

Abstract

Even if a democracy were more likely to pursue free trade than an autocracy (an unproven generalization), the simultaneous spread of democracy in the world would not necessarily yield a reduction in protection, but might in fact cause an increase. The reason for this paradoxical outcome is the fact that democratic convergence creates power profiles identical across nations. Similar regimes tend to empower the same classes of producers, with the result that if trade is based on relative comparative advantages, and countries specialize on the basis of factor endowments, democratic convergence (or any type of regime convergence for that matter) empowers as many fr ee traders as protectionists, with negative consequences for trade; only if trade is fueled by scale economies, and countries specialize along product lines, then may political convergence not hurt trade. Empirically, I show that this model helps explain the timing of nineteenth-century European trade liberalization better than existing explanations; it also helps us understand the easiness with which liberalization proceeded in the postwar era; and it casts a new light on the difficulties presently encountered, with democracy spreading at a time when product specialization is on the retreat.