Deliberative Trade Policy
Evolutionary and Institutional Economics Review, Vol. 3, No. 2, 2007
Posted: 11 Dec 2006
There are 2 versions of this paper
Abstract
Trade policy is normally evaluated according to the standards of allocative efficiency. In contrast, this paper tries to understand trade policy as a solution to the problems of international communication among governments. Basic categories of speech act theory are applied on political action, an approach which I merge with the "cheap talk" paradigm in economics. As a result, I distinguish between trade policy being negotiated via verbal and non-verbal communication, and trade policy as a non-verbal means of deliberation among governments. I apply this approach on a number of recent empirical studies on trade policy, and I draw normative conclusions for the communicative design of international trade policy. The criterion of successful communication replaces the criterion of allocative efficiency, so that well-established results of the political economy of trade appear in a new light. In particular, many institutions and practices of international trade policy that directly contradict efficiency criteria can be explained as enabling the governments to communicate successfully and to reach a deliberative equilibrium in international political economy, which will be influenced by the given distribution of power across countries.
Keywords: trade policy, political communication, language and economics, signaling
JEL Classification: B52, F13, Z00
Suggested Citation: Suggested Citation