Political Responses to Offshoring
Empirical approaches derived from standard trade models predict that labor and capital
will divide over trade when factors of production are mobile and unite when factors are
industry specific. For modern societies with highly specialized productive assets, this
suggests that labor and capital will cohere on trade issues. For example, Magee, Brock,
and Young’s (1989, chap. 7) analysis of Congressional testimony on the 1973 Trade Act
finds that trade associations and labor unions adopted the same position in nineteen of
twenty-one industries. Hiscox (2001) questions these tests but still concludes that low
factor mobility has produced industry-based coalitions in recent U.S. trade politics. In
studies spanning multiple countries over long time periods, Rogowski (1989) and Hiscox
(2002) analyze trends in trade-related cleavages between labor and capital. However,
political divisions between classes of labor– as distinct from labor and capital– are an
unexplored topic, and the implications of offshoring specifically for political cleavages
over trade have not been extensively studied to date.
The distributional effects of offshoring provide expectations about the political
responses of different classes of labor. Because offshoring benefits high-skilled workers
and harms low-skilled workers, the former have incentives to support policies that
facilitate offshoring and the latter have incentives to support policies to limit offshoring.
Thus, high-skilled workers will tend to seek policies that open the domestic market to
offshored goods and services, while low-skilled workers are likely to push for policies
that close the domestic market to offshored goods and services. Moreover, if labor skills
drive trade preferences, then workers with different skills– even those that are joined in
the same unions– will tend to form separate lobby groups to advance their trade interests.
In the case of the motion picture industry, the costs and benefits of international
factor movements are likely to reinforce the incentives for different classes of labor to
respond differently to policies toward offshoring. Generalizing from the distributional
effects detailed earlier, high-skilled labor will tend to support policies to facilitate capital
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Convention