Publication Type: Conference Paper/Unpublished Manuscript
Abstract: This paper argues that standard theories of corporate trade policy preferences, which are mainly based on the US and West European experience, are inadequate for explaining the preferences of firms in an important set of industries which should be ?easy? cases for them ? steel producers and steel consuming industries ? which have played a large role in many countries? economic development and industrialization. Standard theories argue that firms which are highly export dependent and/or have extensive multinational operations (including many steel-using industries) should oppose protection, particularly for key inputs (like steel), because protection raises costs and can stimulate retaliation. This topic is particularly significant since many countries have tried to promote the steel industry using protection, while simultaneously promoting steel-using industries like automobiles or shipbuilding. Standard theories of trade policymaking would predict that the steel-using industries (particularly exporters) should oppose protection for steel.Surprisingly, steel consumers ? even exporters ? often acquiesce in or even support protection for steel in the seven countries examined in this study: Japan, South Korea, Taiwan, Britain, Germany, Brazil, and the US. These puzzling preferences can be explained by different industrial organization factors and economic institutions, particularly in cases where informal hidden protection can be effected through cartels or other forms of collusion or anticompetitive business practices. Moreover, preferences are also affected by bargaining and compensation. Steel-using industries are often willing to support protection for steel in return for some form of compensation. How and when this occurs is affected by political and economic institutions. Thus, institutions help to shape firms? preferences. This study illustrates how comparative study can help make theories of trade policymaking more general.