Explaining protectionism and liberalization in European Union trade policy: the case of textiles and clothing

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  • This article was downloaded by: [Temple University Libraries]On: 14 November 2014, At: 11:05Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH,UK

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    Explaining protectionism andliberalization in EuropeanUnion trade policy: the case oftextiles and clothingMehmet UgurPublished online: 04 Feb 2011.

    To cite this article: Mehmet Ugur (1998) Explaining protectionism and liberalizationin European Union trade policy: the case of textiles and clothing, Journal of EuropeanPublic Policy, 5:4, 652-670, DOI: 10.1080/13501769880000071

    To link to this article: http://dx.doi.org/10.1080/13501769880000071

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  • Journal of European Public Policy 5:4 December 1998:652-70

    Explaining protectionism and liberalization in European Union trade policy: the case of textiles and clothing Mehmet Ugur

    ABSTRACT The political economy of trade policy models and theories of European Union (EU) policy-making can explain only the incidence of protectionism or inertia in EU trade policy. To address this weakness, this article proposes an alternative approach based on state--society interaction under different degrees of issue transparency/ divisibility. In this perspective, four endogenous policy outcomes may emerge: strict protectionism, selective protectionism, selective liberalization and dominant liberalization. The conclusion is that the level of protectionism is determined by the level of issue transparency/divisibility rather than the level of protectionist demands. This conclusion- based on the functionality of European integration in equalizing the rates of returns on societal loyalty to a territorial jurisdiction - is tested against evidence on the evolution of the EU's textiles and clothing policy during the Multifibre Arrangement and Uruguay Round negotiations. The evidence lends support to this argument and suggests that regional integration, in contrast to the unqualified claims of its opponents and proponents, is conducive to both protectionism and liberalization - depending on the extent to which trade policy issues are treated as transparent/divisible.

    KEY WORDS European integration; EU trade policy; lobbying; protectionism; textiles and clothing.

    Developed countries have protected their textiles and clothing (T&C) industry not only during the short- and long-term agreements of 1961-73, but also under the Multifibre Arrangement (MFA) of 1973-94. Over this period, the European Union's (EU's) policy has gone through low-level protectionism up until 1976, strict protectionism from 1977 to 1985 (Dolan 1983; Aggarwa11983; Farrands 1979; Pelkmans 1993), and gradual liberalization after 1986. The reversal of the policy in 1986 led not only to the elimination of national quotas in 1993, but also to the conclusion of the Agreement on Textiles and Clothing (ATC) in 1994. This article develops and tests an analytical framework for explaining the incidence of protectionism/liberalization in EU trade policy on the basis of two variables: the level of protectionist pressure and the degree of transparency/divisibility of the policy issue.

    Section 1 reviews briefly the political economy of trade policy (PETP) literature 1998 Routledge 1350-1763

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  • Protectionism and liberalization in EU trade policy 653

    in economics and the political science perspectives on EU policy-making. This review suggests that the existing literature derives the policy outcomes in a reductionist manner from the demands for protection and the institutional context within which they emerge. To address this shortcoming, section 2 presents an alternative approach, suggesting that the degree of protectionism in EU policy may or may not be a positive function of protectionist demands - depending on the level of issue transparency/divisibility. Section 2 will demonstrate that the level of protectionism is inversely related to issue transparency/divisibility and may be positively or negatively related to the level of protectionist demands of the producers. Section 3 probes the relevance of this analytical framework by examining the EU's T&C policy in the context of both the MFA and the Uruguay Round. The evidence presented there suggests that the level of protectionism in EU policy tended to be high (low) when issue transparency/divisibility was low (high) and the sign of the association between protectionism and the level of protectionist demands depended on the extent to which the T&C trade policy issue was treated as transparent/divisible.

    1. PROTECTION A N D INERTIA IN EU TRADE POLICY: A BRIEF REVIEW

    What is common to the PETP and theories of EU policy-making is the acknowledgement that policy outcomes must be derived from state-society interaction. Yet this is only part of what is required to derive a non-reductionist policy stance. It is also necessary to conceptualize the state-society interaction without deriving the policy outcomes from the preferences of either the state or the society. This is what is missing in Magee (1997), who states that policy-makers cannot control the level of protectionism any more than an auctioneer can control the price of pork bellies. This reductionist tendency ignores the possibility that the state (or the policy-maker as a proxy) may deploy strategies that enable it to resist protectionist demands.

    This is acknowledged implicitly in Rodrik (1994), who criticizes the PETP for treating the supply of protection (i.e. the state) as a 'black box'. This criticism applies, for example, to Findlay and Wellisz (1982) and Magee (1984) who assume that the level of protection is a positive function of lobbying by import-competing industries and a negative function of lobbying by consumers and other industries. Given the collective action problem faced by the large and diffused group of consumers (Olson 1965), both works conclude that trade policy will be protectionist. The same logic also leads Magee et aL (1989: chs 3, 9) to show that protectionism will prevail even when the parties' election probability is an increasing function of the contributions they receive and a decreasing function of the policy intervention they are committed to. A similar tendency can also be found in Grossman and Helpman (1993). Even though 'the parameters of the country's political economy' are considered as significant, these authors still conclude that protectionism is a positive function of lobbying and the regional/sectoral concentration of the sectors involved.

    As observed by Meier (1990) and Rodrik (1994), this approach suffers from a

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  • 654 M. Ugur

    bias towards treating the state as a soft entity akin to a price-taker firm. The state's territorial competence, however, may enable the policy-maker to choose either the level of protection or the intensity of the protectionist demands as given and react accordingly. If the policy-maker chooses the latter, the PETP's tendency to derive the level of protection from societal preferences may be justified. If, however, the state picks up a certain level of protection as given, the demands for protection will be the dependent variable determined in the 'market'. The level of protection to be chosen can be determined, for example, within a regional integration framework that enables the member states to approximate their policies and reduce the ability of the pro-protection groups to secure special treatment.

    The impact of regional integration on the level of protectionism is discussed widely in the PETP literature. The verdict is generally pessimistic: regional integration generates high levels of protectionism as the freeing of intra-bloc trade intensifies the demands for protection against extra-bloc trade (see, for example, Bhagwati 1993). One deviation from this trend is de Melo et aL (1993), who show that a customs union (CU) may lead to less protectionism as lobbyists in different member states take the actions of each other as given and end up with lower levels of lobbying. Another contribution, by Panagariya and Findlay (1994), demonstrates that protection in a CU may be lower than in a free trade area (FTA) as the common external tariff (i.e. policy convergence) makes protection a public good. Then a free- rider problem emerges, leading to a fall in the supply of protection as the level of lobby donations declines. Despite their improvement on the preceding PETP models, these contributions are still reductionist: they derive the lower level of protectionism from the dampening effect that regional integration has on protectionist demands. This, however, is incompatible with the evidence suggesting that the EU's T&C policy has become less protectionist without a fall in protectionist lobbying.

    Are theories of EU policy-making better equipped to deal with such outcomes? I will explore this question by beginning with policy community/networks. Authoritative reviews of this literature can be found in Petersen (1995) and Richardson (1996). Therefore, I will limit myself to its implications for EU trade policy. As Rhodes (1990), Marsh and Rhodes (1992) and Petersen (1995) point out, policy networks reflect a spectrum of coherence and stability determined by membership insularity and strength. Therefore, one can relate the perpetuation of the status quo in policy outcomes to network stability/coherence. This, however, poses more problems than it resolves. First, the continuity of the T&C policy network did not ensure continuity in the policy stance. This was despite the fact that societal members of the T&C policy network such as the Co-ordination Committee for the Textile Industries in the European Community (COMITEXTIL) remained the main source of technical inputs until the 1990s. Second, there is no rule for determining ex ante why a certain policy area would generate a less or more stable policy network. Finally, the policy community/ networks literature does not build on an explicit state theory (Kassim 1994) that would allow for determining whether the interdependence between policy actors is symmetric or asymmetric.

    As a result, the approach would predict protectionism as long as the

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  • Protectionism and liberalization in EU trade policy 655

    interdependence is symmetric and the societal members of the policy network represent declining industries. This can also be deduced from the theoretical/ historical links between corporatism and policy communities/networks. The proliferation of EU-level policy communities/networks can be related to the demise of corporatism at the national level which was due to the emergence of global factors that challenged the Keynesian policy framework within which corporatist bargaining took place (Streeck and Schmitter 1991). As a substitute for structured corporatism, the policy community/network would enable the societal members representing declining industries to blur the transparency/divisibility of the policy issues by supplying partial information and the symmetric interdependence between the policy actors is highly likely to generate protectionist policy outcomes.

    The application of institutionalism to EU policy-making has also commanded positive reviews (Pollack 1996; Keman 1997; Kerremans 1996). Institutions, defined as formal rules and procedures, structure the relationship between the actors of the economy and polity (Hall 1986: 19). Therefore, they do matter as intervening variables between the preferences of society and the state (Pierson 1994, 1996); or between member state preferences and EU policy output (Scharpf 1988; Moe 1990; Tsebelis 1990, 1994; Pollack 1996). Nevertheless, both historical and societal institutionalism suggests that institutions emerge as a source of inertia. That is because of the rigidity of the institutions (Hall 1986: 233-4, 266), or the 'lock-in' effect generated by past policies (Pierson 1996). Although such outcomes may be significant aspects of the policy process, it is also necessary to explain how a given policy convergence codified at the EU level may emerge despite institutional differences between the member states, or enable the latter to bypass the 'lock-in'.

    Contributions to rational choice institutionalism are aware of these limitations. Therefore, they treat institutions as 'rules in use' rather than 'rules for use'. This macro-level institutionalism is useful in explaining how EU institutions may compel the member states to agree to policies that they otherwise may not adopt. Viewed from a principal-agent perspective, this may be due to the EU institutions' (i.e. the agent's) 'shirking' or 'bureaucratic drift', which the member states (the principals) could not prevent because of imperfect information or limited capacity to sanction (Scharpf 1988; Moe 1990; Tsebelis 1990,1994; North 1990; Garrett 1992; Pollack 1996). The weakness here, however, is the absence of a micro-foundation within which interaction between the state and society can be conceptualized.

    A similar absence of mi...

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