economic interests & trade preferences pt. 2

what are global value chains?

the idea that products are rarely made in only one place. this makes export v.s. import ideas messy because tarrifs on foreign imports can hurt domestic producers.

what are protectionist groups?

a group that is small in number but has large financial stakes per person, easy to organize into powerful lobbies

what are consumers?

millions of people that lose only a few dollars from a tariff, hard to organize because of the “free rider” agenda

what is the outcome of the collective action problem?

concentrated interests (protectionists) often beat diffused interests (consumers)

what is import substitution industrialization? (ISI)

protectionism isn’t always corrupt lobbying, developing countries sometimes use it strategically

what is the infant industry?

protecting new local industries from foreign competitors until they come up

what is the critique of ISI?

temporary protections often become permanent because companies fight to keep their high statuses (rent-seeking)

what is voter ignorance?

ordinary voters rarely understand which economic groups benefit or lose from tariffs (economic models)

what is the impact of information?

when voters are told who wins and loses under economic models, high skilled individuals becomes more interested in supporting trade policies that protect their specific interests

what is pocketbook voting?

someone evaluating a policy by its effect on their own economic situation

ex: my factory just annouced tarffs.

what is sociotropic voting?

someone evaluating a policy by its effect on the national economy even when it doesn’t effect their own income

ex: the news says national unemployment rates went up, but my own job is fine