ABSTRACT
The current political environment in the United States demonstrates clearly that trade policy can be a highly contentious issue within democracies. Even prior to the 2008 economic slowdown, members of Congress have increasingly demanded that protectionist barriers be raised against trade with China. In the 2004 presidential election, the protectionist message of John Edwards appeared to resonate with middle-class workers, even though the vast majority of them probably benefi t from trade openness (via cheaper consumer goods), and a relatively small percentage of them will actually lose their jobs as a result of trade. Part of the reason for this apparent contradiction may well reside in the lack of an extensive social insurance policy for those who do lose their jobs as a result of trade: even though a majority may expect to benefi t from trade ex ante, a majority might still reject openness because its downside risks are too high in the absence of insurance (see, for example, Fernandez and Rodrik 1993). That such a dynamic shows signs of infl uencing public policy even in the United States, with its large internal market that is relatively isolated from shocks in the global economy, suggests that sustaining openness in democracies that lack substantial social safety nets may be a dicey proposition (Adsera and Boix 2002).
