Hostname: page-component-6bf8c574d5-vmclg Total loading time: 0 Render date: 2025-02-18T21:41:03.075Z Has data issue: false hasContentIssue false
  • English
  • Français

Economic Interests and Regional Trading Arrangements: The Case of NAFTA

Published online by Cambridge University Press:  19 February 2003

Kerry A. Chase
Get access

Abstract

This article examines lobbying in the United States on the North American Free Trade Agreement (NAFTA). I argue that economies of scale and production sharing across borders create incentives for firms to seek regional trade liberalization. Statistical analysis demonstrates that sectors with these characteristics were more likely to lobby for free trade in North America; these sectors were also exposed to free trade more rapidly under the tariff-phasing schedule in the NAFTA treaty. However, corporate restructuring to rescale production for the regional market and to increase offshore assembly presented adjustment costs for U.S. workers, which created divisions between labor unions and their employers. I conclude that regional arrangements are an attractive mechanism to liberalize trade for firms in need of larger-than-national markets to take advantage of economies of scale or to develop production-sharing networks.

Type
Articles
Information
International Organization , Volume 57 , Issue 1 , Winter 2003 , pp. 137 - 174
Copyright
Copyright © The IO Foundation 2003

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alt, James E. and Gilligan, Michael. 1994. The Political Economy of Trading States: Factor Specificity, Collective Action Problems, and Domestic Political Institutions. Journal of Political Philosophy 2 (2):165–92.CrossRefGoogle Scholar
Alt, James E., Frieden, Jeffry, Gilligan, Michael J., Rodrik, Dani, and Rogowski, Ronald. 1996. The Political Economy of International Trade: Enduring Puzzles and an Agenda for Inquiry. Comparative Political Studies 29 (6):689–717.CrossRefGoogle Scholar
Bain, Joe S. 1959. Industrial Organization New York: John Wiley and Sons.Google Scholar
Bhagwati, Jagdish. 1993. Regionalism and Multilateralism. An Overview. In New Dimensions in Regional Integration, edited by de Melo, Jaime and Panagariya, Arvind, 22–51 New York: Cambridge University Press.CrossRefGoogle Scholar
Busch, Marc L., and Milner, Helen V.. 1994. The Future of the International Trading System. International Firms, Regionalism, and Domestic Politics. In Political Economy and the Changing Global Order, edited by Stubbs, Richard and Underhill, Geoffrey, 259–76. New York: St. Martin's Press.CrossRefGoogle Scholar
Busch, Marc L., and Reinhardt, Eric. 1999. Industrial Location and Protection: The Political and Economic Geography of U.S. Non-Tariff Barriers. American Journal of Political Science 43 (4):1028–50.CrossRefGoogle Scholar
Casella, Alessandra. 1996. Large Countries, Small Countries, and the Enlargement of Trade Blocs. European Economic Review 40 (2):389–415.CrossRefGoogle Scholar
Caves, Richard E. 1976. Economic Models of Political Choice: Canada's Tariff Structure. Canadian Journal of Economics 9 (2):278–300.CrossRefGoogle Scholar
Caves, Richard E. 1991. Trade Liberalization and Structural Adjustment in Canada: The Genesis of Intra-Industry Trade. In The Dynamics of North American Trade and Investment: Canada, Mexico, and the United States, edited by Reynolds, Clark W., Waverman, Leonard and Bueno, Gerardo, 44–69. Palo Alto, Calif: Stanford University Press.Google Scholar
Caves, Richard E. 1996. Multinational Enterprise and Economic Analysis, 2d ed. New York: Cambridge University Press.Google Scholar
Caves, Richard E., and Porter, Michael E.. 1976. Barriers to Exit. In Essays on Industrial Organization in Honor of Joe S Bain, edited by Masson, Robert T. and Qualls, P. David, 36–69. Cambridge: Ballinger.Google Scholar
Chase, Kerry A. 2002. From Protectionism to Regionalism: Foreign Investment, Commitment, and the Canada-United States Free Trade Agreement. Unpublished manuscript, Tufts University, Medford, Mass..Google Scholar
Conybeare, John A. C. 1993. 1992, the Community, and the World: Free Trade or Fortress Europe? In The 1992 Project and the Future of Integration in Europe, edited by Smith, Dale L. and Ray, James Lee, 143–63. Armonk, N.Y.: M.E. Sharpe.Google Scholar
Corden, W. M. 1972. Economies of Scale and Customs Union Theory. The Journal of Political Economy 80 (3):465–75.CrossRefGoogle Scholar
Cox, Ronald W. 1996. Explaining Business Support for Regional Trade Agreements. In Business and the State in International Relations, edited by Cox, Ronald W., 109–27 Boulder, Colo: Colo Westview Press.Google Scholar
Destler, I. M., and Odell, John. 1987. Anti-Protection Changing Forces in United States Trade Politics. Washington, D.C.: Institute for International Economics.Google Scholar
Dick, Andrew R. 1994. Does Import Protection Act as Export Promotion? Evidence from the United States. Oxford Economic Papers 46 (1):83–101.CrossRefGoogle Scholar
Feenstra, Robert C., and Hanson, Gordon H.. 1996. Foreign Investment, Outsourcing, and Relative Wages. In The Political Economy of Trade Policy. Papers in Honor of Jagdish Bhagwati, edited by Feenstra, Robert C., Grossman, Gene M., and Irwin, Douglas A., 89–127. Cambridge, Mass: MIT Press.Google Scholar
Feenstra, Robert C., Hanson, Gordon H., and Swenson, Deborah L. 2000. Offshore Assembly from the United States: Production Characteristics of the 9802 Program. In The Impact of International Trade on Wages, edited by Feenstra, Robert C., 85–122. Chicago: University of Chicago Press.CrossRefGoogle Scholar
Frankel, Jeffrey A., Stein, Ernesto, and Wei, Shang-Jin. 1997. Regional Trading Blocs in the World Economic System. Washington, D.C.: Institute for International Economics.Google Scholar
Frieden, Jeffry A. 1991. Debt, Development, and Democracy Modern Political Economy and Latin America, 1965–1985 Princeton, N.J.: Princeton University Press.Google Scholar
Frieden, Jeffry A., and Rogowski, Ronald. 1996. The Impact of the International Economy on National Policies: An Analytical Overview. In Internationalization and Domestic Politics, edited by Keohane, Robert O. and Milner, Helen V., 25–47. New York: Cambridge University Press.CrossRefGoogle Scholar
Froot, Kenneth A., and Yoffie, David B.. 1993. Trading Blocs and the Incentives to Protect: Implications for Japan and East Asia. In Regionalism and Rivalry Japan and the United States in Pacific Asia, edited by Frankel, Jeffrey A. and Kahler, Miles, 125–56. Chicago: University of Chicago Press.Google Scholar
Gale Research. 1990. Ward's Business Directory of U.S. Private and Public Companies Detroit: Gale Research.Google Scholar
Garten, Jeffrey E. 1993. A Cold Peace America, Japan, Germany, and the Struggle for Supremacy New York: Times Books.Google Scholar
Garten, Jeffrey E. 1995. Is America Abandoning Multilateral Trade? Foreign Affairs 74 (6):50–62.CrossRefGoogle Scholar
Gilligan, Michael J. 1997. Lobbying as a Private Good with Intra-Industry Trade. International Studies Quarterly 41 (3):455–74.CrossRefGoogle Scholar
Gilpin, Robert. 2000. The Challenge of Global Capitalism: The World Economy in the 21st Century Princeton, N.J.: Princeton University Press.CrossRefGoogle Scholar
Grossman, Gene M., ed. 1992. Imperfect Competition and International Trade Cambridge, Mass.: MIT Press.Google Scholar
Grossman, Gene M., and Helpman, Elhanan. 1995. The Politics of Free-Trade Agreements. American Economic Review 85 (4):667–90.Google Scholar
Grunwald, Joseph, and Flamm, Kenneth. 1985. The Global Factory Foreign Assembly in International Trade. Washington, D.C.: Brookings Institution.CrossRefGoogle Scholar
Haggard, Stephan. 1997. The Political Economy of Regionalism in Asia and the Americas. In The Political Economy of Regionalism, edited by Mansfield, Edward D. and Milner, Helen V., 20–49. New York: Columbia University Press.Google Scholar
Helleiner, G. K. 1977. Transnational Enterprises and the New Political Economy of U.S. Trade Policy. Oxford Economic Papers 29 (1):102–16.CrossRefGoogle Scholar
Helpman, Elhanan, and Krugman, Paul R.. 1985. Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy. Cambridge, Mass.: MIT Press.Google Scholar
Helpman, Elhanan, and Krugman, Paul R.. 1989. Trade Policy and Market Structure Cambridge, Mass.: MIT Press.Google Scholar
Hirschman, Albert O. 1981. Essays in Trespassing Economics to Politics and Beyond New York: Cambridge University Press.Google Scholar
Hiscox, Michael J. 2001. Class Versus Industry Cleavages: Inter-Industry Factor Mobility and the Politics of Trade. International Organization 55 (1):1–46.CrossRefGoogle Scholar
Hufbauer, Gary Clyde. 1970. The Impact of National Characteristics and Technology on the Commodity Composition of Trade in Manufactured Goods. In The Technology Factor in International Trade, edited by Vernon, Raymond, 145–231. New York: Columbia University Press.Google Scholar
Hufbauer, Gary Clyde, and Schott, Jeffrey J.. 1992. North American Free Trade: Issues and Recommendations. Washington, D.C.: Institute for International Economics.Google Scholar
Johnson, Harry G. 1965. An Economic Theory of Protectionism, Tariff Bargaining, and the Formation of Customs Unions. Journal of Political Economy 73 (3):256–83.CrossRefGoogle Scholar
Katz, Lawrence, and Summers, Lawrence. 1989. Industry Rents: Evidence and Implications. Brookings Papers on Economic Activity Microeconomics 1989 (1):209–75.CrossRefGoogle Scholar
Kemp, Murray C., and Wan, Henry V. Jr. 1976. An Elementary Proposition Concerning the Formation of Customs Unions. Journal of International Economics 6 (1):95–97.CrossRefGoogle Scholar
Krueger, Anne O. 1997. Problems with Overlapping Free Trade Areas. In Regionalism versus Multilateral Trade Arrangements, edited by Ito, Takatoshi and Krueger, Anne O., 9–23. Chicago: University of Chicago Press.Google Scholar
Krugman, Paul R. 1981. Intra-Industry Specialization and the Gains from Trade. Journal of Political Economy 89 (5):959–73.CrossRefGoogle Scholar
Krugman, Paul R., ed. 1986. Strategic Trade Policy and the New International Economics Cambridge, Mass.: MIT Press.Google Scholar
Krugman, Paul R. 1991. Is Bilateralism Bad? In International Trade and Trade Policy, edited by Helpman, Elhanan and Razin, Assaf, 9–23. Cambridge, Mass.: MIT Press.Google Scholar
Krugman, Paul R. 1993. Import Protection as Export Promotion. International Competition in the Presence of Oligopoly and Economies of Scale. In Imperfect Competition and International Trade, edited by Grossman, Gene M., 75–86. Cambridge, Mass.: MIT Press.Google Scholar
Krugman, Paul R., and Venables, Anthony J.. 1990. Integration and the Competitiveness of Peripheral Industry In Unity with Diversity in the European Economy edited by Bliss, Christopher and de Macedo, Jorge Braga, 55–77. New York: Cambridge University Press.Google Scholar
Lal, Deepak. 1993. Trade Blocs and Multilateral Free Trade Journal of Common Market Studies 31 (3):349–58.CrossRefGoogle Scholar
Lavergne, Réal P. 1983. The Political Economy of U S Tariffs An Empirical Analysis New York: Academic Press.Google Scholar
Levy, Philip I., and Srinivasan, T. N.. 1996. Regionalism and the (Dis)advantage of Dispute-Settlement Access. American Economic Review 86 (2):93–98.Google Scholar
Long, J. Scott, and Freese, Jeremy. 2001. Regression Models for Categorical Dependent Variables Using Stata College Station, Tex.: Stata Press.Google Scholar
Magee, Stephen P., Brock, William A., and Young, Leslie. 1989. Black Hole Tariffs and Endogenous Policy Theory: Political Economy in General Equilibrium New York: Cambridge University Press.Google Scholar
Mansfield, Edward D., and Milner, Helen V.. 1999. The New Wave of Regionalism. International Organization 53 (3):589–627.CrossRefGoogle Scholar
Marvel, Howard P., and Ray, Edward John. 1987. Intra-Industry Trade. Sources and Effects on Protection. Journal of Political Economy 95 (6):1278–9.CrossRefGoogle Scholar
Mattli, Walter. 1999. The Logic of Regional Integration Europe and Beyond New York: Cambridge University Press.CrossRefGoogle Scholar
McGillivray, Fiona. 1997. Party Discipline as a Determinant of the Endogenous Formation of Tariffs. American Journal of Political Science 41 (2):584–607.CrossRefGoogle Scholar
Milner, Helen V.. 1988. Resisting Protectionism Global Industries and the Politics of International Trade. Princeton, N.J.: Princeton University Press.CrossRefGoogle Scholar
Milner, Helen V.. 1997. Industries, Governments, and the Creation of Regional Trade Blocs In The Political Economy of Regionalism, edited by Mansfield, Edward D. and Milner, Helen V., 77–106. New York: Columbia University Press.Google Scholar
Milner, Helen V., and Yoffie, David B.. 1989. Between Free Trade and Protectionism. Strategic Trade Policy and a Theory of Corporate Trade Demands. International Organization 43 (2):239–72.CrossRefGoogle Scholar
Mundell, Robert A. 1964. Tariff Preferences and the Terms of Trade. Manchester School of Economic and Social Studies 32 (1):1–13.CrossRefGoogle Scholar
Olson, Mancur. 1965. The Logic of Collective Action Public Goods and the Theory of Groups Cambridge, Mass.: Harvard University Press.Google Scholar
Olson, Mancur. 1982. The Rise and Decline of Nations Economic Growth, Stagflation, and Social Rigidities. New Haven, Conn.: Yale University Press.Google Scholar
Oye, Kenneth A. 1992. Economic Discrimination and Political Exchange World Political Economy in the 1930s and the 1980s Princeton, N.J.: Princeton University Press.Google Scholar
Peres, Wilson. 1990. Foreign Direct Investment and Industrial Development in Mexico. Paris: OECD Development Center.Google Scholar
Pincus, J. J. 1975. Pressure Groups and the Pattern of Tariffs Journal of Political Economy 83 (4) 757–78.CrossRefGoogle Scholar
Pratten, C. F. 1971. Economies of Scale in Manufacturing Industry. Cambridge: Cambridge University Press.Google Scholar
Ray, Edward John. 1981. The Determinants of Tariff and Non-Tariff Trade Restrictions in the United States. Journal of Political Economy 89 (1):105–21.CrossRefGoogle Scholar
Richardson, Martin. 1993. Endogenous Protection and Trade Diversion Journal of International Economics 34 (3–4):309–24.CrossRefGoogle Scholar
Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington, D.C.: Institute for International Economics.CrossRefGoogle Scholar
Rogowski, Ronald. 1989. Commerce and Coalitions How Trade Affects Political Cleavages Princeton, N.J.: Princeton University Press.Google Scholar
Saxonhouse, Gary R. 1993. Pricing Strategies and Trading Blocs in East Asia. In Regionalism and Rivalry Japan and the United States in Pacific Asia edited by Frankel, Jeffrey A. and Kahler, Miles, 89–119. Chicago: Univeisity of Chicago Press.Google Scholar
Scherer, Frederic M., 1970. Industrial Market Structure and Economic Performance Chicago: Rand McNally.Google Scholar
Scherer, Frederic M., Beckenstein, Alan, Kaufer, Erich, Murphy, R. Dennis, and Bougeon-Massen, Francine. 1975. The Economics of Multi-Plant Operation An International Comparisons Study Cambridge, Mass.:: Harvard University Press.Google Scholar
Silberston, Aubrey. 1972. Economies of Scale in Theory and Practice. Economic Journal 82 (325):369–9.CrossRefGoogle Scholar
Stigler, George. 1968. The Organization of Industry. Homewood, Ill.: Richard D. Irwin.Google Scholar
Thurow, Lester C. 1992. Head to Head The Coming Economic Battle among Japan, Europe, and America New York: Morrow.Google Scholar
Tornell, Aaron, and Esquivel, Gerardo 1997. The Political Economy of Mexico's Entry into NAFTA. In Regionalism Versus Multilateral Trade Arrangements, edited by Ito, Takatoshi and Krueger, Anne O., 25–56. Chicago: University of Chicago Press.Google Scholar
Trefler, Daniel 1993. Trade Liberalization and the Theory ot Endogenous Protection: An Econometric Study of U.S Import Policy Journal of Political Economy 101 (1):138–60.CrossRefGoogle Scholar
U.S. Department of Commerce, Bureau of the Census. 1989. Census of Manufactures Washington, D. C.: U S. Department of Commerce.Google Scholar
U.S. Department of Commerce, Bureau of the Census. 1991. U. S. Commodity Exports and Imports as Related to Output Washington, D.C.: U.S. Department of Commerce.Google Scholar
U.S. Department of Commerce, Bureau of Economic Analysis. 1992. U.S. Direct Investment Abroad Washington, D.C.: U.S. Department of Commerce.Google Scholar
U.S. House. 1993. Committee on Government Operations. The North American Free Trade Agreement and its Impact on the Textile/Apparel/Fiber and Auto and Auto Parts Industries. 103d cong., 1st sess. 4 May.Google Scholar
U.S. International Trade Commission. 1990. Review of Trade and Investment Liberalization Measures by Mexico and Prospects for Future United States-Mexican Relations, Phase I Recent Trade and Investment Reforms Undertaken by Mexico and Implications for the United States Investigation no. 332–282 Washington, D.C.: U.S. International Trade Commission.Google Scholar
U.S. International Trade Commission. 1993. Potential Impact on the U.S. Economy and Selected Industries of the North American Free-Trade Agreement USITC Publication 2596 Washington, D.C.: U.S. International Trade Commission.Google Scholar
Viner, Jacob. 1950. The Customs Union Issue New York: Carnegie Endowment for International Peace.Google Scholar
Wei, Shang-Jin. and Frankel, Jeffrey A.. 1996. Can Regional Blocs Be a Stepping-Stone to Global Free Trade? A Political Economy Analysis. International Review of Economics and Finance 5 (4):339–47.CrossRefGoogle Scholar
Wells, Louis T. Jr., 1992. Conflict or Indifference? U.S. Multinationals in a World of Regional Trading Blocs OECD Technical Paper 57. Paris: OECD Development Center.Google Scholar
Yarbrough, Beth V., and Yarbrough, Robert M. 1992. Cooperation and Governance in International Trade The Strategic Organizational Approach Princeton, N. J.: Princeton University Press.CrossRefGoogle Scholar