Part II examined countries' autonomous trade policies. This chapter extends the political-support theory of tariffs to two countries. I consider first how each country affects the other's autonomous policy, that is, the effects of unilateral liberalization or protectionism on others. Then I look to the possibilities of joint action, that is, cooperation.

Most previous theorists have not considered how one country's trade policy affects the policy choices of other countries (but see Coates and Ludema 2001; Ethier 2001; Krishna and Mitra 2005; Wonnacott and Wonnacott 2005). These effects are important. I find that any two countries' trade policies move in opposite directions unless a trade treaty is in effect between them. Each country's unilateral actions affect the other, which leads the second state to compensate domestic groups harmed by the first's policy. This compensation leads to policy change in the opposite direction. In short: liberalization begets protectionism, and protection induces liberalization.

The resulting outcome is both politically and economically inefficient. The potential gains give politicians an incentive to negotiate mutual tariff reductions, acting jointly instead of separately.