Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries

Rising international trade flows are a primary component of globalization. The liberalization of trade policy in many developing countries has helped foster the growth of these flows. Preceding and concurrent with this move to free trade, there has been a global movement toward democracy. We argue that these two trends are related: democratization of the political system reduces the ability of governments to use trade barriers as a strategy for building political support. Political leaders in labor rich countries may prefer lower trade barriers as democracy increases. Empirical evidence supports our claim about the developing countries from 1970-1999. Regime change toward democracy is associated with trade liberalization, controlling for many factors. Conventional explanations of economic reform, such as economic crises and external pressures, seem less salient. Democratization may have fostered globalization in this period. We wish to thank the editors at International Organization, David Baldwin, Jim Fearon, Robert Keohane, David Latin, Jean Leca, Geoffrey Garrett, Tim Groseclose, Barbara Geddes, Robert Kaufmann, Edward Mansfield, Jim Morrow, Ronald Rogowski, B. Peter Rosendorff, Alex Segurra, Robert Trager, Mike Tomz, Romain Wacziarg, and Greg Wawro for their very helpful comments on versions of this paper. We also received helpful comments from seminar participants at the University of Michigan, Stanford University, University of Pennsylvania, Syracuse University, Princeton University, Rutgers University, Yale University, and the University of California at Berkeley. Ben Judkins, Robert Trager, and Tom Kenyon provided invaluable research assistance. An earlier version was presented at the 2001 APSA meetings in San Francisco.