Export Jobs, Special Interest Groups, and the US Presidential Election of 2016: The Case of West Virginia.

Author:Ovaska, Tomi
  1. Introduction

    During the 2016 presidential election, two camps of small special interest groups in West Virginia had opposing views on the benefits of international trade. Following the previous works by Olson (1965), Stigler (1971), Peltzman (1976), and Becker (1983), we establish an empirical connection between the winning candidate's trade orientation and his vote share. Our study also provides evidence on how an antitrade stance in elections is coming under increasing pressure with advancing globalization and the consequent strengthening of new, small, concentrated protrade special interest groups. We also show graphically how this clash of groups decreases import prices and society's deadweight loss from trade barriers.

    With the economic decline of the traditionally politically powerful mining and metal industries, the balance of economic power in West Virginia has been moving toward more protrade industries. This case study explores the collision of these two types of groups and workers: those whose income suffers under international trade and those whose income depends on international trade. The former group's income relies on restricting international trade, while the latter group's income depends on exports and a secure and cheap global supply chain of foreign intermediate goods (inputs) used in domestic production processes.

    This study is related to the literature on the effect of international trade--and, more broadly, of globalization--on presidential voting. Many studies have shown the links between various economic factors and voting (e.g., Fair 1978; Quinn and Woolley 2001; Campbell 2008; Campbell and Lewis-Beck 2008; Fair 2009; Erikson 2009; Milner and Tingley 2011; Feigenbaum and Hall 2015; Kayser and Leininger 2015; Lewis-Beck and Tien 2008). However, empirical literature scrutinizing the direct effect of international trade on presidential voting is scarce. The exceptions are Margalit (2011) and Jensen, Quinn, and Weymouth (2017). Margalit (2011) uses plant-level Trade Adjustment and Assistance application data from the US Department of Labor and finds that trade-related job losses hampered support for the incumbent in the 2000 and 2004 election cycles. Jensen, Quinn, and Weymouth (2017) use establishment-level census data to examine how county-level employment variation in firms in comparatively advantaged and disadvantaged sectors affects US presidential elections. They find geographical concentration of high-skilled (low-skilled) employment to be associated with increases (decreases) in incumbent vote shares.

    This study contributes to the literature in several ways. First, we depart from the previous incumbent--opposition-party model and focus on the voting shares of a specific candidate, Donald J. Trump, who ran a strong antitrade campaign. The merit of our approach is that the incumbent--opposition-party voting model cannot clearly reveal the implications of voters' preference for open-trade policy since an incumbent may be pro- or antitrade depending on the electoral region where he or she is campaigning. Second, we look at the most recent US presidential election and incorporate the theory of special interest groups (i.e., the logic of collective action) with the discussion to explain the election's outcomes. Third, we examine West Virginia as a special case study where special interest groups from import-competing industries have traditionally had a loud voice in and impact on elections. We also show that the electoral landscape is undergoing changing dynamics. Last, we argue that this change foments competition among special interest groups, improving societal welfare.

    The next section describes West Virginia's economy and changes in its industrial structure. We then analyze the political economy of the 2016 presidential election in West Virginia. Next, we describe our data, the trend of export-related jobs in West Virginia, and regressions highlighting the relationship between Trump's vote share and export-related jobs by West Virginia county. We follow that with an empirical analysis of how export-related jobs are associated with Trump's vote share. Then, we discuss the logic of collective action and apply it to a graphical, hypothetical case study of West Virginia. Finally, we summarize the paper's arguments and findings.

  2. The Demographics and Industrial Structure of West Virginia

    West Virginia's population in 2017 was about 1.81 million. According to the Bureau of Labor Statistics, from 2003 through 2017, the size of West Virginia's labor market fluctuated between 783,000 and 814,000 and the unemployment rate between 3.3 percent and 12.0 percent, the typical rate being about 1 percentage point above the national rate. The state's 2016 gross domestic product was $70.2 billion, averaging $38,784 per person, placing West Virginia as forty-ninth in the nation, just ahead of Mississippi, according to the Federal Reserve Bank of St. Louis. As measured by GDP, West Virginia's largest industry was government, at $11.61 billion, followed by finance, insurance, real estate, rental, and leasing at $9.65 billion, according to the Bureau of Economic Analysis. Mining completes the big three industries, grossing $8.93 billion. The manufacture of steel and steel products is an important industrial activity, though it is statistically spread among several different activity categories.

    Table 1 uses the Bureau of Economic Analysis's economic activity classification to compare West Virginia's economic structure to that of the United States. The differences in the structure are comparatively small. West Virginia looks much like America, though with a larger (and highly cyclical) mining sector and a smaller financial sector, according to the Bureau of Economic Analysis. West Virginia also has a high share of government purchases of goods and services. A large share of the state's government activity is income transfers from federal sources. While West Virginia's government sector is relatively large, over the fourteen-year observation period of 2002-2015 the state's the private-sector share has risen faster than the United States', with mining (from the oil and natural gas boom), construction, and professional services showing particularly robust growth. Meanwhile, finance, insurance, and real estate rental and leasing (FIRE), along with manufacturing, have declined in their share of the total.

  3. The Political Economy of the Presidential Election in West Virginia

    In the 2016 presidential election, Donald J. Trump won a clear majority of votes in all of West Virginia's fifty-five counties (table 2). Monongalia County had the lowest share of votes for Trump, though that share was still over 55 percent of the total. Grant County had the highest share of Trump votes with nearly 90 percent (New York Times 2017).

    While West Virginia has chosen a Republican candidate in the last five presidential elections, Trump's 2016 victory margin over his opponent in this state was unprecedented. Research into the exact reasons is still ongoing, but it has been suggested that candidate Trump benefited disproportionately from the support of white working-class voters, who have seen their economic standing erode for decades (Cohn 2016). Trump promised on the campaign trail that he would revive West Virginia's traditionally strong and well-paying basic industries: mining (coal, oil, metal) and steel working. Trump also delineated the reasons for West Virginia's malaise--the unfair international trade practices of America's trading partners--and promised quick help for the suffering workers in those industries. Not surprisingly, the trade groups in the affected industries supported Trump.

    Following his campaign theme, in his inaugural address on January 20, 2017, President Trump said, "We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs." He continued, "[Import] protection will lead to great prosperity and strength." True to his rhetoric, as one of his first official actions in office, President Trump withdrew the United States from the world's largest emerging free trade block, the Trans-Pacific Partnership, or TPP (Maudlin 2017). As a consistent critic of the North American Free Trade Agreement, The Office of the US Trade Representative has also renegotiated that treaty, now known as the United States-Mexico-Canada Agreement (pending congressional approval), to purportedly benefit domestic industries.

    Not surprisingly, not everyone has agreed with Trump's plan. The Center for Automotive Research alleged that Trump's restrictive trade plans could result in major American job losses (Dziczek et al. 2016, p. 15). The Economist (2016) pointed out that "Implicit in [...] Mr. Trump's view of international trade [is]: a patriotic contest in which countries strive to take each other's jobs--or seize them back." Not surprisingly, many corporate executives as well as mainstream economists have also expressed their concerns about the president's antitrade policies (Lee 2017; Margolis 2016). Regardless, his trade advisers noted that "President Trump will use all available means to defend American workers and American manufacturing facilities from [...] cheating, including tariffs" (Long and Gillespie 2016).

    The politically powerful United Steel Workers Union District 8 covering West Virginia is an example of a union that supports Trump: it has maintained a consistent position against cheap imported steel, especially from China. Furthermore, the group has been encouraging presidents to take action to stop steel imports from China and instead rely on US steel, according to the website of United Steel Workers District 8. Referring to steel and aluminum tariffs, the United Steel Workers wrote in a July 11, 2018, press statement, "Congress must be careful not to jeopardize national security, scuttle that investment and throw thousands of...

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