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

This study uses a simple method to capture the expected effects of NAFTA on jobs and follows the approach used by Baldwin (1985) and Kahane (1994). A survey of six studies on the sectoral employment effects of NAFTA is conducted in order to identify which sectors are most likely to witness employment gains which are likely to suffer job losses. Table 1 below gives a brief summary of these studies. Employment levels for these identified sectors, by state, are used [TABULAR DATA FOR TABLE 1 OMITTED] to construct two variables for each state: "GAINERS", which is equal to the number of workers employed in sectors expected to experience job gains, and "LOSERS" equal to the number of workers in a state employed in sectors expected to experience job losses from NAFTA. The sectors composing GAINERS and LOSERS are shown in Table 2.

Table 2

SECTORS COMPOSING GAINERS AND LOSERS VARIABLES

Employment measure     Sectors included

GAINERS                non-electrical machinery, rubber
                       Chemicals, electrical machinery

LOSERS                 textiles, apparel, leather prods.,
                       furniture, glass

Assuming legislators are concerned with minimizing the displacement of costs to workers due to NAFTA, in the case where the value of LOSERS is large the legislator would be less inclined to vote for the agreement. On the other hand, in states where the value of GAINERS is large, legislators would be more inclined to support NAFTA, all else equal.(13) It should be noted that in some instances the studies surveyed give contradictory predictions for specific sectoral effects. Stern, Deardorf and Brown (1992), for example, predicts that the transportation equipment sector will suffer job losses, whereas the DRI/McGraw Hill (1992) study predicts that this sector will gain on net. In cases where contradictory predictions are given, unless the remaining studies provide strong support for either view, the sector is excluded from the calculation of GAINERS and LOSERS.

In addition to the variables described above a third variable EXPORTS, equal to the value of exports by state in 1992, is tested as an alternative to GAINERS in the logit analysis. Since NAFTA is expected to positively affect primarily capital intensive (non-labor intensive) sectors in the US, simply measuring expected employment gains may underrepresent the total gain these sectors may witness. The variable EXPORT, on the other hand, may better represent the expected gains to manufacturers (and government revenues, perhaps) that produce output for export and who stand to gain from NAFTA.

The Environment. In order to test for the influence this issue had on voting patterns of legislators, two variables are introduced. The first is the environmental "score" each member of congress received from the environmental group the League of Conservation Voters (LCV). Every year the LCV calculates a score for each member of Congress equal to the percent of votes cast by the legislator on environmental issues that agrees with the views of the LCV.(14) The expected sign for this variable is ambiguous since, as noted above, environmental groups were split over the support for NAFTA.