Sectoral Reciprocity

Sectoral reciprocity is a trade agreement between two countries to reduce or eliminate trade barriers in a certain, strategic category of goods. Sectoral reciprocity is beneficial because greater openness in trade gives people access to more affordable and/or higher quality goods. Also, if such an agreement is successful, it may help pave the way for freer trade in additional areas.

A government might decide to pursue sectoral reciprocity when it wants to participate in an important market. If the United States wanted to be able to sell semiconductors in Japanese markets, they might be able to convince the Japanese to open their markets to this foreign competition by making it easier for Japanese electronics firms to sell their goods in American markets.

In the 1980s, several sectoral reciprocity proposals would have required the U.S. government to restrict access to U.S. markets for any major trading partner, on a sector-by-sector basis, if that partner denied U.S. exports comparable market opportunities. Although most analysts concede that the threat of sectoral reciprocity can be a useful negotiating tactic, it is generally believed that implementation of such policies would constrain negotiations and reduce the opportunity for achieving trade liberalization through broad, cross-industry compromises.

Sectoral reciprocity and the concept of reciprocity, in general, has become a commonly accepted basis for free trade in part because, if a country were to embrace unilateral free trade, it would relinquish its seat at the negotiating table. Without the ability to negotiate unique sets of terms, politicians wouldn't have the means to attract potential trade partners. Sectoral reciprocity trade concessions make it easier to sell an agreement. If governments try to sell free trade because it makes it easier to import, many would agree, but few would actively support such a deal. However, when governments sell free trade on the basis of how many jobs it can supposedly create, many are inclined to buy in, even though the truth may actually prove to be counter-intuitive.

Politicians today are finding it harder than ever to sell unilateral free trade to large working-class voting bases, who have seen their jobs eliminated by imports and new technologies. However, this new challenge is one of the politicians' making: by selling free markets as something we enter into because it will generate more exports, pro-free trade leaders have actually fed into a narrative that undermines the argument for improved access to a wider circle of goods and services.