The Pro-Trade Lobby: MNCs and PTAs

• In Event: Firm-Level Politics of Trade

Abstract

We theorize that multinational corporations support preferential trade agreements because they are high-productivity firms that engage in significant related-party trade, and they seek to shape the terms of such agreements to limit competition and enhance their own competitiveness. We construct an original firm-level dataset to capture the number of news search hits pertaining to trade agreements that mention particular Fortune 500 firms, firms’ lobbying activity, and the time periods in which particular PTAs and proposed PTAs were under negotiation. The annual number of hits per firm is used as a proxy for firm interest in a particular trade agreement and likelihood of seeking to exert political influence over treaty negotiations. Two search criteria are used to identify the news articles/business insight reports from LexisNexis archive: “firm&treaty,” and “firm&treaty&lobbying.” We conduct diff-in-diff analysis using both of these measures, using firms with investment in a country that is potentially involved in a PTA negotiation as the treatment group and firms without investment in that country as the control group. The results show that the number of hits per invested firm sees a sharp increase immediately after the initiation of negotiations, which persists through the third year of negotiation. We verify our interpretation of news hits by regressing the number of lobbying reports on them, and we find robust associations between treaty hits and lobbying hits and firm lobbying activity at an aggregate level, in Congress, both in the House and in the Senate, and of the USTR. We control for divided government and cases in which the majority party of either the House or the Senate differs from the President’s party, and find that effects are strongest when government is divided.

Authors

• Jihye Park, University of Geneva

• Randall W. Stone, University of Rochester