Political support for trade policy in the European Union

- We use a CGE model of the EU economy to estimate marginal effects of tariffs.
- We back out political weights implied by welfare and rent effects of EU tariffs.
- Welfare weights relative to rents are more plausible than from lobbying data.
- Accounting for intermediate interests, agriculture is not more important.
- With a political support based tariff function downstream linkages are important.

We adopt the Stigler-Peltzman model of policy-making as developed by Hillman for application to the politics of international trade, in which the government is represented by a political support function trading-off the industry rents stemming from protection against the losses accruing to the general population. As a starting point, we examine the economic impact of actual government action as revealed by the structure of protection, backing out the weights implied by the marginal welfare effects of the set of EU import tariffs across sectors. We build on Tyers' application of methods to international trade employing a numerical general equilibrium model of the EU. This captures direct marginal effects of sector-level protection on protected industries, indirect effects on upstream and downstream industries, and the effect on overall welfare. We then deconstruct the revealed weighting pattern along the lines of industry nationality and related industry characteristics.