This paper develops a theory of “quid pro quo” trade preferences in which governments use preferential market access as payment for non-trade objectives rather than as instruments of traditional commercial policy. Using a new panel dataset that links tariff preferences granted by the United States and the European Union to voting alignment in the UN General Assembly, troop contributions to multilateral peace-keeping operations, and bilateral migration control efforts, we find that deeper preference margins are systematically awarded to countries that supply these cooperative public goods.

Key findings:

The relationship is strongest in sectors where the preference-granting country has little import competition, indicating that the exchange is infra-marginal to domestic welfare.

Counterfactual simulations:

Counterfactual simulations suggest that replacing politically motivated preferences with a uniform MFN tariff would raise welfare in the preference-granting countries by 0.06% of GDP, but would reduce cooperative public-good supply by 12–18%.

Conclusion:

Our results imply that trade preferences operate as an efficient, off-budget mechanism for purchasing foreign cooperation, reconciling the apparent persistence of such policies with standard political-economy explanations.