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Misaligned Lawmaking in International Trade

Timothy Meyer


Abstract

Since 1962, when Congress passed the Trade Expansion Act, every new U.S. trade deal has had the same essential bargain at its core. Congress agrees to give the president the power to lower trade barriers in exchange for assistance for those workers displaced by competition with new imports. This bargain illustrates what I refer to as the Misalignment Thesis. In the trade context, the misalignment occurs because the trade liberalization provisions in the agreement are indefinite, enshrined in an international agreement, and implemented by the executive branch; the assistance provisions are temporary, purely domestic, and require renegotiation and reauthorization in Congress.

As a consequence, proponents of policies to help displaced workers are constantly having to renegotiate and defend laws to help their constituents. Moreover, they have to do so within an institution, Congress, in which the transaction costs of securing favorable policy outcomes are very high. The result is that policies aimed at helping workers displaced by trade liberalization are chronically undersupplied.

Proponents of trade liberalization, on the other hand, never have to renegotiate their gains (at least until now). Each trade agreement goes into the pocket of trade proponents, and then they move on to securing the next trade agreement. Nor does Congress maintain a meaningful role in the implementation of trade agreements. Once the agreement is in effect, implementation is left to the executive branch, where the transaction costs of enacting a trade liberalizing agenda are quite low. 

The Misalignment Thesis has both a descriptive and a normative component. The descriptive Misalignment Thesis states that when a legislative bargain is struck over two or more competing policies, the policy that is subject to more frequent or costlier renegotiation and implementation will be disfavored in the long run. The normative corollary is that if political stability hinges on respecting the legislative bargain, the policies should be subject to renegotiation on the same time line and implementation on the same terms.