Learning to act on world trade preference formation of large firms in the United States and the European Union

In: MPIfG discussion paper 05,1

Abstract

Lobbying by economic actors constitutes a central element of a large part of the literature on trade policy-making. However, it is mainly considered as inputʺ into the political system, which then aggregates the demand of different societal interests. As such inputs, the preferences of economic actors are often simply deduced from economic theory. This paper raises doubts about the usefulness of this analytical parsimony and tries to distinguish more clearly between stable interests, preferences and strategic choices. In particular, it suggests a model that clarifies how abstract interests are translated into concrete policy choices. By examining the lobbying carried out by service providers in the United States (US) and the European Union (EU) in telecommunications and air transport, it then shows that the deduction of trade policy preferences from economic theory does not account well for the general support of multilateral trade liberalization by EU service providers. In particular, changes in identity, causal beliefs and strategic environments in the US and the EU create a variety of lobbying choices that goes beyond the material incentives of trade liberalization. By studying the learning process and the constraints on lobbying imposed by political institutions, the paper suggests that even the political preferences of strong economic actors are sometimes more appropriately dealt with as endogenous to the trade policy process.