Giovanni Maggi (Yale University)

“Are Trade Agreements Good For You?”

Abstract: We examine how trade agreements affect global welfare when they are influenced by producer lobbies. A “shallow” agreement that deals only with trade policies tends to be good for you, as it pits exporter lobbies against import-competing lobbies. But the impacts of “deep” agreements that focus on domestic policies are different: they tend to be bad for you when they deal with consumption-side policies and good for you when they deal with production-side policies, at least when lobbying pressures are strong. This is because the interests of domestic and foreign producers are aligned when it comes to consumption-side policies, while they collide when it comes to production-side policies. The presence of international ownership linkages tends to worsen the welfare implications of trade agreements, because it reduces the distortions in unilateral policies while it has little effect on cooperative policies.