International Trade and Political Conflict

Commerce, Coalitions, and Mobility

Michael J. Hiscox

• Publisher: Princeton University Press
• Year: 2020
• Print ISBN:
  9780691088556
  9780691088549
• eBook ISBN:
  9780691214863
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

This book unveils a potent new approach to one of the oldest debates in political economy--that over whether class conflict or group competition is more prevalent in politics. It goes further than any study to date by outlining the conditions under which one type of political conflict is more likely than the other. Michael Hiscox focuses on a critical issue affecting support for and opposition to free trade--factor mobility, or the ability of those who own a factor of production (land, labor, or capital) to move it from one industry to another. He argues that the types of political coalitions that form in trade politics depend largely on the extent to which factors are mobile between industries. Class coalitions are more likely where factor mobility is high, Hiscox demonstrates, whereas narrow, industry-based coalitions predominate where it is low.


The book also breaks new ground by backing up the theory it advances with systematic evidence from the history of trade politics in six nations over the last two centuries, using a combination of case studies and quantitative analysis. It makes fresh conclusions about the forces shaping trade policy outcomes--conclusions that yield surprising insights into the likely evolution of the global trading system and U.S. trade policy in particular. International Trade and Political Conflict is a major contribution to the scholarly literature while being accessible to anyone interested in understanding and predicting developments in trade policy.

PART I

Trade Theory, Factor Mobility, and Political Conflict

CHAPTER ONE

Trade, Distribution, and Factor Mobility

The expansion of international trade has been a powerful engine driving economic growth in Western nations over the last two centuries. At the same time, since trade has had disparate effects on different sets of individuals within each economy, it has provoked an enormous amount of internal political conflict. Although such conflict between winners and losers has been a constant in trade politics over the years, the character of the political coalitions that have fought these battles—the nature of the societal cleavages that the trade issue has created—appears to have differed significantly across time and place. Most importantly, the extent to which conflict over trade policy has led to clashes between broad class-based coalitions has varied across historical settings.

As a consequence, the literature on the political economy of trade has developed something of a split personality. Many scholars following in the grand tradition of E. E. Schattschneider (1935) have focused on the political role of narrow industry groups, or “special interests,” in the policymaking process. This approach, which emphasizes the competition between coalitions of business and labor groups positioned on both sides of the debate over trade, has been prominently adopted by Peter Gourevitch (1986) and Jeffry Frieden (1991) and is common to quantitative studies of trade barriers inspired by the endogenous policy literature in economics.¹ In contrast, Ronald Rogowski (1989) has examined broad factoral or class coalitions in a range of historical contexts, highlighting political conflicts between owners of land, labor, and capital over the direction of trade policy. Other analysts, drawing distinctions between owners of multinational and other types of capital or between skilled and unskilled labor, have made similar assumptions about the centrality of class cleavages in trade politics (Helleiner 1977; Midford 1993).

Empirical evidence suggests support for both approaches. The lobbying free-for-all among industry groups that led to the U.S. Smoot-Hawley Tariff Act in 1930 lives in infamy, and most accounts of contemporary U.S. trade politics indicate that such groups have played a prominent role in recent battles over the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT). Historical accounts of trade politics in a variety of nations—particularly France during the nineteenth century—reveal that these kinds of industry-based cleavages have a long and robust ancestry.² However, examples of broader class-based cleavages are also familiar. Perhaps most famously, workers in nineteenth-century Britain, taking on the ruling Tories and the landed elite, aligned with capitalists to provide mass support for freer trade and the Anti-Corn Law League. A similar contest developed in the United States after the Civil War—this time between pro-trade farmers and protectionist urban classes—and led to a Republican tariff in 1890 that was denounced by Democrats as the “culminating atrocity of class legislation.”³

That both class and group approaches have found empirical support in a variety of contexts demonstrates the need for a way to bridge the gulf between them that would specify the conditions under which one is more appropriate than the other. This need is fundamental on both theoretical and substantive levels. Coalitions are the manifestation of conflicts of interests among individuals in society over the direction of policy. As such, they lie at the very heart of politics. Yet, in the past, scholars examining the political origins of trade and other forms of economic policy have been largely content to make opposing general assumptions about the nature of these conflicts of interest—assuming that individuals will take different positions in disputes over trade and other policies depending on their economic class or on the industry or sector of the economy in which they are employed.

These assumptions are the very building blocks of positive political economy, and their relative appropriateness, an issue rarely addressed directly, is a central concern for all engaged in explaining and predicting the evolution of economic policy. By better accounting for the types of coalitions generated by trade and other economic policy issues, analysts will also be better able to assess the degree to which these cleavages and other types of political divisions within a political system map onto one another and thus whether they are compounding or cross-cutting. For instance, class divisions over the trade issue appear to have complemented and thus intensified the broad conflict between urban and rural coalitions over electoral reform in Britain in the nineteenth century, and the conflict over remonetization of silver in the United States in the 1880s and 1890s. Narrower, industry-based divisions over trade, however, tend to cut across and thus mitigate class antagonisms over other policy issues.

In this book I apply the standard economic theory of trade to provide a solution to the problem by focusing on interindustry factor mobility—that is, the ease with which owners of factors of production (land, labor, and capital) can move between industries in the domestic economy. If factors are mobile between industries, the effects of trade on incomes divide individuals along class lines, setting owners of different factors (such as labor and capital) at odds with each other regardless of the industry in which they are employed. If factors are immobile between industries, the effects of trade divide individuals along industry lines, setting owners of the same factor in different industries (labor in the steel and aircraft industries, for example) at odds with each other over policy.

This book presents the first systematic evidence on levels of interindustry factor mobility, examining six Western economies (the United States, Britain, France, Sweden, Canada, and Australia) during the nineteenth and twentieth centuries.⁴ The data indicate that substantial variation in factor mobility coincides with different stages of industrialization and different amounts of regulation in these economies. The patterns in this variation, and their anticipated effects, are shown to fit broadly with the development of trade politics in these nations during different historical eras. I examine trade cleavages in each nation since the 1820s, emphasizing the effects of such cleavages on the behavior of political parties and peak associations and the lobbying efforts of major industry groups. I also provide a detailed statistical analysis of the effects of changing cleavages on congressional voting on trade legislation in the United States between 1824 and 1994. The results indicate that broad class-based conflict is more likely when levels of factor mobility are relatively high, and narrow industry-based conflict is more likely when levels of mobility are relatively low.

The findings reported here have important implications for the analysis of trade politics and the politics of economic policy more generally. They suggest that the types of political coalitions that take shape in society and organize to influence economic policy making largely depend on one basic feature of the economic environment that may vary over time (and across nations): the extent to which factors of production are mobile between industries within the economy. Put simply, the stakes that individuals have in policies that affect the industry in which they are employed or invested will vary greatly depending on how easy it is for them to move their assets elsewhere. Thus, interindustry mobility is crucial for understanding the political-economic origins of a vast range of trade, monetary, industrial, and regulatory policies that affect the relative fortunes of different industries or mediate the effects of other exogenous changes upon them. The extent to which these policy issues generate class conflict, rather than industry-based rent-seeking, will hinge critically on levels of factor mobility in the economy.

Class conflict can be a tumultuous and disruptive force in politics, of course, producing sharp fluctuations in economic policy as first one side then another gains control of government. But broad-based class coalitions are also more encompassing of society as a whole, as Olson (1982) famously noted, and thus they are more likely than narrow industry groups to take an interest in expanding the size of the whole economic pie rather than just snatching the largest piece of it they can. If politics devolves into a free-for-all contest among industry-based lobby groups, a large portion of an economy’s resources may end up devoted to zero-sum distributive battles rather than to productive economic activities (Bhagwati 1982).⁵ If a stable pattern of compromise can be established between broad class coalitions, providing for efficiency-enhancing types of economic policies and methods of compensation, class cleavages seem far more appealing (for reasons of efficiency quite apart from issues of equality). This is essentially the model crafted by the Swedish economists who shaped Social Democratic policies in the 1950s and 1960s, and they recognized that maintaining such a broad-based compromise required programs that discouraged industry rent-seeking by supporting and promoting high levels of interindustry mobility among owners of labor and capital. In the end, a very strong case emerges for extensive forms of adjustment assistance to workers and firms (allowances for retraining, relocation, and reinvestment) that would enable them to respond to changes in the international economy in more efficient, nonpolitical ways, while at the same time mitigating the costs imposed upon particular groups by such exogenous shocks.

1.1 THE EXISTING LITERATURE

Explaining differences in the types of cleavages that emerge in trade politics is a task that generally has been set aside in past research on the political economy of trade. The dominant tendency has been to assume one type of coalition exists, usually in order to explain particular policy outcomes, and ignore the problem entirely. Rogowski (1989) explicitly assumes class-based coalitions, for instance, while Gourevitch (1986) focuses on industries. Frieden (1991) adopts a sectoral or industry-based approach when outlining his theory but allows that class coalitions have actually emerged as more important political entities in some of the economies he examined.

When the coalition issue has been addressed in the broader political science literature, attention has focused primarily on the effects of electoral and policymaking institutions. Political organizations geared to representing broad types of coalitions are more likely when the franchise is extended more widely among society (see Duverger 1954; LaPalombara and Weiner 1966; Cox 1987). Some types of electoral systems that encourage intraparty competition and the development of a “personal vote” may be more conducive to group “rent-see...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Contents
• List of Tables and Figures
• Preface and Acknowledgments
• Part I: Trade Theory, Factor Mobility, and Political Conflict
• Part II: Political Conflict in Six Nations over Trade
• Part III: Conflict in the U.S. Congress over trade
• Part IV: Conclusion
• Appendixes
• Bibliography
• Index