MULTINATIONAL FIRMS, POLITICAL COMPETITION, AND INTERNATIONAL-TRADE POLICY

This paper considers how the presence of multinational firms influence s international trade policy that is determined as the outcome of poli tical competition. Multinational firms have plants to protect in all p olicy jurisdictions, and hence are more protectionist than national fi rms which at least have an interest in free trade in export markets. N onetheless because of changed incentives for firms to provide politica l support for free-trade and protectionist candidates an increased mul tinational presence via either merger or direct foreign investment has a liberalizing influence on trade policy.