Transnational Corporations, Intra-Firm Trade and the New Political Economy of US Trade Policy

Little of the orthodox literature of the theory of international trade addresses the question of the political sources of trade policies. The various arguments for the use of trade barriers are typically considered from the standpoint of ‘the national interest’ and, on the basis of conventional assumptions, the conclusion is reached that in all instances other than those where the terms of trade can be favourably altered, trade barriers are harmful to ‘the nation’ or are a second-best means of attaining the stipulated ‘national’ objectives. The state is perceived as the representative of the collectivity of individuals and firms within the nation, for whom it (somehow) acts to maximise their collective welfare. There exists some discussion in this theoretical literature of the effects of trade barriers upon the distribution of the national income, but it is typically based upon crude two-factor assumptions which are not too illuminating for the understanding of empirically observable phenomena. (Stolper and Samuelson, 1941).1