IR468      Half Unit
The Political Economy of Trade

This information is for the 2015/16 session.

Teacher responsible

Dr Stephen Woolcock CLM 6.13


This course is available on the MPA in European Public and Economic Policy, MPA in International Development, MPA in Public Policy and Management, MPA in Public and Economic Policy, MPA in Public and Social Policy, MSc in International Affairs (LSE and Peking University), MSc in International Political Economy, MSc in International Political Economy (LSE and Sciences Po), MSc in International Political Economy (Research) and MSc in Political Science and Political Economy. This course is available with permission as an outside option to students on other programmes where regulations permit.

Course content

The focus of the course is on explanations of trade policy choices as the result of political and economic factors. The first part of the course covers key models in the economics of international trade, including the New New Trade Theory. The second part of the course addresses political economy theories to explain protectionism and trade liberalisation. Particular attention is devoted to the role of interest groups and domestic political institutions in trade policy. The third part of the course studies how international regimes (e.g. the WTO and preferential trade agreements) affect trade policy in developed and developing countries. The fourth part of the course focuses on the effect of trade liberalisation in developing economies. This part of the course places emphasis on the relationship between trade, foreign direct investment, and the activities of multinational companies. The last lecture of the course looks at the links between international trade and monetary policy during periods of crises.


10 hours of lectures and 15 hours of seminars in the LT.

10 lectures and 10 seminars in LT. Topics:

1. Macro-economic models: Sector model and factor model

2. Macro-economic models: New Trade Theory and New New Trade Theory

3. Political economy models: The Role of Institutions

4. Political economy models: The Role of Interest Groups

5. From the GATT to the WTO: The multilateral trading system

6. The proliferation of preferential trade agreements: Causes and consequences

7. Trade and development

8. The Politics of FDI in developing countries

9. FDI, inequality, and economic growth in developing countries

10. Trade, exchange rates, and financial crises

Students on this course will have a reading week in Week 6, in line with departmental policy.

Formative coursework

Students will be expected to produce 1 essay in the LT.

Indicative reading

Alfaro, L., Chanda, A., Kalemli-Ozcan, S., and Sayek, S. (2004). “FDI and Economic Growth: The Role of Local Financial Markets.” Journal of International Economics 64(1): 89-112.

Alt, Friedan, Gilligan, and Rodrik. (1997) “The Political Economy of International

Trade: Enduring Puzzles and an Agenda for Inquiry.” Comparative Political Studies, pp.


Baccini, L. and Urpelainen, J. (2014). “International Institutions and Domestic Politics: Can

Preferential Trading Agreements Help Leaders Promote Economic Reform?” The Journal of Politics.

Chase, K. A. (2003). “Economic Interests and Regional Trading Arrangements: The Case of NAFTA.” International Organization 57(1): 137-174.

Goldstein, J. L., Rivers, D. and Tomz, M. (2007). 'Institutions in International Relations: Understanding the Effects of the GATT and the WTO on World Trade.' International Organization 61(1): 37-67.

Grossman, G. M. and Helpman, E. (1994). “Protection for Sale.” American Economic Review 84(4): 833-850.

Kono, D. Y. (2006). “Optimal Obfuscation: Democracy and Trade Policy Transparency.” American Political Science Review 100(3): 369-384. 

Melitz, M. (2003). “The impact of trade on intraindustry reallocations and aggregate

industry productivity,” Econometrica, 71, 1695-1725.

Rogowski, R. (1987) “Political Cleavages and Changing Exposure to Trade.” American Political Science Review, Vol. 81 (4), pp. 1121-1137.

Scheve, K. F. and Slaughter, M. J. (2001b). 'What Determines Individual Trade-Policy Preferences?' Journal of International Economics 54(2): 267-292.

Baccini, L. and Dür, A. (2011). “The New Regionalism and Policy Interdependence.” British Journal of Political Science.

Baldwin, R. E. (1993). “A Domino Theory of Regionalism.” NBER Working 5 Paper No.4465.

Freund, C. and Ornelas, E. (2010). “Regional Trade Agreements.” Policy Research Working Paper 5314.

Gilligan, M. J. 1997. “Lobbying as a Private Good with Intra-Industry Trade”. International Studies Quarterly, 41(3):455-474.

Hainmueller, J. and Hiscox, M. J. (2006). 'Learning to Love Globalization: Education and Individual Attitudes Toward International Trade.' International Organization 60(02): 469-498.

Hiscox, M. J. (2001). “Class Versus Industry Cleavages: Inter-Industry Factor Mobility and the Politics of Trade.” International Organization 55(1): 1-46.

Irwin, D. A. (1995). 'The GATT in Historical Perspective.' American Economic Review 85(2): 323-328.

Jensen, N. (2003). “Democratic Governance and Multinational Corporations: The Political Economy of Foreign Direct Investment.” International Organization 57(3): 587-616.

Jensen, Nathan M. and Guillermo Rosas. (2007) “Foreign Direct Investment and Income Inequality in Mexico, 1990-2000.” International Organization 61: 467-487.

Kono, D. Y. 2009. “Market Structure, Electoral Institutions, and Trade Policy”. International Studies Quarterly, 53(4):885-906.

Li, Q. and Resnick, A. (2003). “Reversal of Fortunes: Democracy, Property Rights and Foreign Direct Investment Inflows in Developing Countries.” International Organization 57(1): 175-214.

Manger, M. (2009). “Framework for Analysis.” In: Investing in Protection: The Politics of Preferential Trading Agreements between North and South. Cambridge University Press.

Mansfield, E. D. and Mutz, D. C. (2009). 'Support for Free Trade: Self-Interest, Sociotropic Politics, and Out-Group Anxiety.' International Organization 63(03): 425-457.

Milner, H. and Kubota, K. (2005) “Why the Move to Free Trade? Democracy and

Trade Policy in the Developing Country,” International Organization, Vol. 59, p. 107-


Steinberg, R. H. (2002). 'In the Shadow of Law or Power? Consensus-Based Bargaining and Outcomes in the GATT/WTO.' International Organization 56(2): 339-374.

Wacziarg, R. and Horn Welch, K. (2008). “Trade Liberalization and Growth: New Evidence.” The World Bank Economic Review 22(2): 187-231.


Exam (100%, duration: 2 hours) in the main exam period.

The final examination lasts 2 hours and students will be asked to answer 2 out of 8 questions.

Key facts

Department: International Relations

Total students 2014/15: Unavailable

Average class size 2014/15: Unavailable

Controlled access 2014/15: No

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Leadership
  • Self-management
  • Team working
  • Problem solving
  • Application of information skills
  • Communication
  • Application of numeracy skills
  • Commercial awareness
  • Specialist skills