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Abstract
The paper questions why agricultural trade compromise between the USA and EC is so
difficult, whether a compensatory scheme be found that is both politically feasible and resource saving, and
whether liberalizing policies by selected OECD countries will ease a trade compromise. These questions
are addressed in a political economy context since, if the influence of special interests is ignored, trade
compromises that both save resources and are politically feasible are unlikely to be searched for or found.
The analysis entails the estimation of political preference weights, game theory, and a partial equilibrium
world trade model based on 1988 data. The general answers are: the most influential special-interest
groups face economic losses that, when coupled with their influence, tend to prevent a broad-based trade
compromise given the current set of policy instruments; partial trade liberalization can occur if
instruments are decoupled from production incentives, but free trade does not result; and partial
liberalization by the rest of the OECD greatly increases the feasibility for the USA and EC to compromise.
These results illustrate that interdependence in world trade has reached the point where bilateral action
alone is unlikely to lead to real liberalization.