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Over the last 60 years, multilateral trade liberalization has reduced tariffs to historically low levels. The dominant theory of multilateral trade agreements, based solely on terms-of-trade externalities between national governments, is the conventional wisdom among international trade theorists. But it features two defects that render it inconsistent with reality. This chapter proposes a simple formulation of the political economy of protection that dispenses with terms-of-trade externalities, predicts the properties that empirical work has confirmed, and is free of the counterfactual implications of the dominant approach. The model is applied to trade agreements.

This paper develops a theory, consistent with empirical evidence, of trade agreements as the exchange of market access. The WTO dispute settlement process is discussed in this context. The role of that process is neither to deter nor to punish violations of trade agreements, but to maintain reciprocity.