Trade Protectionism and Electoral Outcome
Yu, Miaojie, The Cato Journal
In the 2004 U.S. elections, the dispute on trade policy was one of the important issues between the Democrats and the Republicans. The Democratic Party emphasized that the U.S. government should link multinational trade agreements to labor and environmental issues. Conversely, the Republican Party advocated free trade and pledged to make the expansion of trade a consistent priority. This dispute over trade policy raises an interesting question: Does a party's tariff platform affect its electoral outcome? It is recognized that, in the late 20th century, the Democratic Party was labeled as a promoter of protectionism (Magee, Brock, and Young 1989). Simultaneously, the Democrats lost their longtime majority in the House of Representative with the election of the 104th Congress in 1994. Hence, it is natural to ask: Did the high Democratic tariff platform translate into its falling vote share?
Previous studies have recognized that campaign contributions and lobbies affect trade policy. The related theoretical models on the political economy of trade policy have two different approaches. The first one is the median-voter approach, developed by Mayer (1984), Mayer and Li (1994), and Magee, Brock, and Young (1989).
According to the first two studies, trade policy is determined by majority voting, while political parties maximize their probability of winning the election by choosing a tariff platform. Similarly, Magee, Brock, and Young (1989) considered a political model of endogenous policy formation. Under their framework, two parties set their trade platforms and then interest groups contribute funds in order to increase the probability that their preferred party will be elected.
The second theoretical approach is called political support. This approach rationalizes that tariffs are granted in response to demands made by special interest groups such as industries and unions. The government then weighs the increased political support it generates from pursuing policies beneficial to a particular industry against the support it loses from firms and consumers (Hillman 1989). Grossman and Helpman (1994) developed this idea and found the optimal tariff formation for the government. Models with the political-support approach explicitly present the relationship between campaign contributions and optimal tariffs, yet they do so at the expense of ignoring political competition between parties.
On the empirical side, previous works have focused mostly on the factors that determine congressional roll-call vote patterns on American trade policy. These works include those of Baldwin (1985), Irwin (1996), and Beaulieu (2002). The Stolper-Samuelson theorem implies that trade policy is independent of industry and depends only on the type of factor ownership. Based on this prediction, Baldwin (1985) published the pioneering work that examined the determinants of congressional vote patterns on trade legislation for the Tokyo Round of GATE Shortly thereafter, Irwin (1996) investigated this issue using data from the British general election of 1923, where trade policy was the primary issue. Both papers suggested that stronger labor unions are likely to be associated with a higher level of trade protectionism.
Two more findings are important in understanding the vote pattern from the political science perspective. First, labor unions are a strong electoral base for the Democratic Party. In addition, the Democrats also maintain a strong influence on groups such as African-American voters and metropolitan residents. Second, campaign contributions play an important role in the voting pattern. For example, Snyder (1990) found evidence of a positive relation between a political candidate's probability of winning and the amount of money the candidate collects from campaign contributors. Levitt (1994), meanwhile, found that challenger spending is marginally more productive than incumbent spending. Baldwin and Magee (2002) also found evidence that voting behavior on recent trade bills can be explained by campaign contributions from special interest groups. …