Congressional voting patterns on NAFTA: an empirical analysis - North American Free Trade Agreement

American Journal of Economics and Sociology, The, Oct, 1996 by Leo Kahane

I

Introduction

On December 8, 1993 President Bill Clinton signed into law the North American Free Trade Agreement and, in doing so, he brought to a close the lengthy political process that produced it. NAFTA, which lowers trade barriers over a period of 15 years across a broad spectrum of goods between the US, Canada and Mexico, was the subject of one of the most heated political contests of recent times. Political groups opposing NAFTA, including organized labor, some environmental groups, former presidential candidate, Ross Perot, and various industry associations which represented sectors that stood to lose from a free trade agreement with Mexico, waged an expensive political battle to defeat NAFTA. Supporters of NAFTA which included US export-oriented businesses, as well as political and economic interests in Mexico have collectively spent an estimated $25 million lobbying in the US in favor of NAFTA.(1)

The goal of this paper is to conduct an empirical analysis of the House and Senate voting patterns on NAFTA in order to determine which factors seem to have played important roles in shaping the votes of members of Congress and also how the impact of these factors differed in the House and Senate. Results from the logit model estimation confirm that expected job gains/losses, the presence of organized labor and political ideology (as represented by political party) were significant predictors of a legislator's vote on NAFTA. Finally, the issue of NAFTA's expected effects on the environment was found to be somewhat important in determining the votes cast by legislators.

The remainder of this paper is organized into four sections. The next section provides a brief discussion of the origins of NAFTA and highlights key issues raised in debates over its passage. Section 111 follows with a description of the econometric model and data used to examine the voting patterns of House and Senate members on NAFTA. Section IV presents the results and interprets the empirical model. The final section contains the conclusions.(2)

II

The Debate over NAFTA

The concept of a free trade agreement with Mexico predates the 1991 negotiations between US President George Bush and Mexican President Carlos Salinas de Gortari. In fact, Mexican economic analyst, Redvers Opie, broached the subject during a US Senate Finance Subcommittee hearing on international trade in 1979.(3) But it was not until 1990 that Bush and Salinas began discussing the possibility of a free trade agreement in earnest.

Under pressure from Salinas and Bush, negotiators completed a trade agreement which was signed by both presidents in Aug. of 1992. Newly-elected President Bill Clinton submitted the agreement, which now included side agreements to handle labor and environmental issues, to the House in Nov., 1993.(4) Following passage in the House on Nov. 17, the Senate approved NAFTA three days later.

The debates in Congress over NAFTA focused on three primary issues related to the treaty: NAFTA's effects on employment in the US, its effect on the environment both North and South of the US-Mexican border, and its effects on immigration from Mexico into the US. Each of these themes is discussed briefly below.

The expected employment effects of NAFTA were by far the most common point of debate and were at the center of a series of Senate Finance Committee hearings held during Sep., 1992 and again in Sep., 1993. It was well understood that NAFTA would lead to job decreases in some sectors and job creation in others. The main point of contention was the expected net effects of NAFTA on employment. The position of the committee members, the administration and public witnesses on this point were often polarized. Senator Donald Riegle Jr. (D-Mich.), for example, noted in his opening statement at Sep. 8, 1992 Senate Finance Committee hearings, "The main export we are going to ship to Mexico under the agreement, apparently, as it has been negotiated here, is going to be jobs."(5) This sentiment was echoed by Thomas R. Donahue, secretary-treasurer of the AFL-CIO as he noted in his prepared 1993 statement, "In brief, the AFL-CIO believes that the adoption of [NAFTA] would seriously harm the US economy, resulting in the loss of hundreds of thousands of American jobs and a decline in the nation's standard of living."(6) Whereas administration witness, US Trade Representative, Carla Hills, held the opposite view as she noted in 1992, "This agreement will generate new, higher-paying jobs for Americans. More than 600,000 Americans now owe their jobs to our exports to Mexico. This number is expected to swell to over 1 million by 1995 with NAFTA."(7)

The second most popular point of debate was the expected effects of NAFTA on the environment. Two arguments surfaced on this point. The first was that Mexico was lax in its enforcement of environmental laws and that increased trade with the US likely would lead to further environmental deterioration especially along the border region between the US and Mexico. The second argument was that a free trade agreement with Mexico would encourage US manufacturers to relocate south of the border in order to circumvent the more restrictive environmental standards in the US. But the position of environmental groups on the likely impact of NAFTA on the environment were split. While the Sierra Club, Greenpeace and Friends of the Earth, were steadfastly oppose to NAFTA, others, including the National Wildlife Federation, the World Wildlife Fund and the National Audubon Society supported it. The US Environmental Protection Agency also endorsed NAFTA and pronounced it as "the 'greenest' trade agreement ever negotiated."(8)