States in the Customs House: Institutional Reforms and Structural Change in Mexican Trade Policy 1 Anthony Pezzola Pontificia Universidad Cato´lica de Chile How constituent interests influence policy outcomes depends on a country’s political institutions. The examination of Mexican trade policy in two different institutional settings demonstrates that electoral systems influence who receives preferential treatment by politicians. Specifically, when electoral institutions make politicians beholden to territorially specific constituencies, the political clout of an industry stems from its importance within the political jurisdictions that it inhabits. The centrifugal influence of Mexican electoral reforms and the emergence of divided government increased the political salience of subnational economic interests. Where political clout once stemmed from an industry’s impor- tance in the national economy, the political clout of an industry now depends heavily on its importance to subnational economies. To understand why some industries receive protection, we need to understand how economic interests penetrate the policy-making process. The electoral reforms in Mex- ico that led to increased political competition and the increased salience of territorially based constituents pro- vide an exceptional study of how political institutions influence trade policies. By measuring the influence of subnational interests on Mexico’s trade policy between 1990 and 2005, this paper demonstrates that electoral reforms altered which economic interests policymakers favor. Subnational economic interests have become a determining factor in Mexican trade policy, a clear shift from the pre-reform period. While an industry’s national importance once played heavily on the policy-making pro- cess, the relative importance of an industry in the constit- uencies that it inhabits best explains whether the industry benefited from protection after 1997. These findings indi- cate that traditional measures of political clout do not adequately measure political clout when politicians are beholden to territorially specific constituencies. Political institutions influence whom policymakers choose to privilege through trade policy. We know that the strength of a country’s party system and the type of electoral system (Hankla 2006), the number of veto points within the government (Henisz and Mansfield 2006), and the strength of the executive branch (Ehrlich 2007) influence the susceptibility of policymakers to geo- graphically specific interests. However, little investigation has been done on how electoral reforms influence trade policy (for example, Colombia, Indonesia, Japan, Mexico, New Zealand, the Philippines, and South Korea). Mexico’s electoral reforms significantly increased politi- cal competition, culminating in the emergence of divided government in 1997 and the capturing of the Presidency by an opposition party in 2000. As Grossman and Help- man (1994) point out, changes in the rules of the politi- cal game affect government’s willingness and ability to protect specific economic interests. The degree of protec- tion received by an industry depends on the political strength of interested parties, which, in turn, depends on the sensitivity of politicians to the interests of the voters who elect them. The greater the political salience of vot- ers, the greater role their interests should play in struc- turing trade policy (Grossman and Helpman 1994). Although different parties maintain different political objectives, increased competition forces the positions taken by politicians to converge with the interests of their constituents (Grossman and Helpman 2001). Hence, because political competition increases the comparative advantage of Mexican voters, trade policy came to reflect the economic interests of the constituencies that elect federal representatives. Even though voters may not be organized, as long as they have an interest in protecting locally important industries, elected officials will repre- sent these interests (Denzau and Munger 1986). Mexico’s electoral reforms in the 1990s make the study of Mexican policies particularly appropriate if we seek to understand how political competition interacts with con- stituent interests to influence trade policy. While political competition dramatically increased during the 1990s, the formal powers of Mexico’s political actors remain rela- tively unaltered. Therefore, by examining trade policy across time in Mexico, the paper gains significant causal leverage by holding ‘‘constant’’ a wide range of political, social, and cultural factors normally omitted from cross- national studies. The paper demonstrates that the politi- cal concentration and size of an industry, commonly used by scholars of international political economy to measure the political clout of an industry (for example, Busch and Reinhardt 1999; McGillivray 2004), fail to assess accurately the political clout of an industry when politi- cians represent the interests of geographically specific constituencies. This paper also contributes to our understanding of the political process behind the use of nontariff barriers (NTBs) by developing countries. More broadly, the paper adds to a growing literature on the biases introduced into policy making by geographic representation. We know that subnational interests can distort the policy-making 1 Author’s notes: I would like to thank Jeffery Drope and the anonymous reviewers for helpful comments on earlier versions of this paper. Web appen- dices and data can be found at http://www.icp.puc.cl/Anthony_Pezzola/. This research is framed within the Millennium Nucleus for the Study of Stateness and Democracy in Latin America, Project No. NS100014. Pezzola, Anthony. (2012) States in the Customs House: Institutional Reforms and Structural Change in Mexican Trade Policy. International Studies Quarterly, doi: 10.1111/j.1468- 2478.2012.00755.x Ó 2012 International Studies Association International Studies Quarterly (2013) 57, 341–355 Downloaded from https://academic.oup.com/isq/article/57/2/341/1789949 by guest on 01 April 2024