Fragmenting Protection: The Political Economy of Trade Policy in the Post-Communist World

Abstract

Scholars and policy makers have displayed a longstanding interest in the politics of economic reform, particularly over the 1990s as former Communist countries struggled to develop market economies. Yet remarkably little systematic research has been conducted on the political economy of commercial reform in the post-Communist world. We argue that the fragmentation of power within post-Communist countries has been a potent force for trade liberalization. In non-democracies where political power is highly concentrated in the hands of a small group of elites, state leaders face few impediments to rent seeking and are well insulated from interests favouring commercial reform. In non-democracies where power is fragmented within the national government, however, new elites with weak ties to the old regime are well placed to use trade liberalization as a weapon against their political opponents. Moreover, the dispersion of power in non-democracies creates space for groups favouring free trade to promote trade liberalization. Finally, in democracies, the dispersion of power within the national government combined with electoral competition creates an especially potent impetus to trade liberalization. To assess these arguments, we analyse the trade policy of post-Communist countries during the period 1990–98. The results support our claims, highlighting the importance of examining institutional differences within as well as across regime types in analyses of economic policy.