Class Versus Industry Cleavages: Inter-Industry Factor Mobility and the Politics of Trade

Class Versus Industry Cleavages: Inter-Industry FactorMobility and the Politicsof Trade Michael J.Hiscox

Introduction

Theexpansion of internationaltrade has been a powerfulengine driving economic growthin Western nations over the last two centuries. At thesame time, it has provokedan enormous amount of internalpolitical con ict, since trade has disparate effectson different sets of individuals within an economy. Although con ict between“ winners”and “ losers”has been a constantin tradepolitics, the character ofthepolitical coalitions that have fought these battles— the nature of thesocietal cleavagesthat the trade issue creates— appears to have differed signi cantly across timeand place. Consequently,the literature on the political economy of trade has developed somethingof a splitpersonality. Many scholars, following in thegrand tradition of E.E.Schattschneider,have focused on thepolitical role of narrowindustry groups or“ specialinterests” in the policymaking process. 1 Thisapproach has been prominentlyadopted by PeterGourevitch and is common to quantitativestudies of tradebarriers inspired by the “ endogenouspolicy” literature in economics. 2 In contrast,Ronald Rogowski has famouslyexamined broad factoral or classcoalitions ina rangeof historical contexts, highlighting political con icts among owners of land,labor, and capital over the direction of tradepolicy. 3 Otheranalysts, drawing distinctionsbetween owners of multinationaland other types of capital,or between

Anearlier versionof this article was presentedat the1995 Annual Meeting of theAmerican Political Science Associationin Chicago. I thankJim Alt,Carles Boix,Lawrence Broz,Jeff Frieden,Mike Gilligan,Peter Gourevitch,Douglas Irwin, David Lake, Ron Rogowski, Cheryl Schonhardt-Bailey, VeritySmith, Daniel Verdier,and two anonymous reviewers forhelpful comments. 1.Schattschneider 1935. 2.Gourevitch 1986. See also,for example, Anderson 1980; Lavergne 1983; and Baldwin 1985. 3.Rogowski 1989.

InternationalOrganization 55,1, Winter 2001, pp. 1– 46 © 2001by TheIO Foundationand the Massachusetts Instituteof Technology 2 InternationalOrganization skilledand unskilled labor, have made similar assumptions about the centrality of classcleavages in trade politics. 4 Empiricalevidence suggests support for bothapproaches. The lobbying free-for- allamong industry groups that led to the U.S. Smoot-HawleyTariff Actin 1930 livesin infamy, and most accounts of contemporaryU.S. tradepolitics indicate that suchgroups have played a prominentrole in recentbattles over the North American Free TradeAgreement and the General Agreement on Tariffs andTrade (GATT). Historicalaccounts of trade politics in a varietyof nations— in particular, France duringthe nineteenth century — revealthat these kinds of industry-basedcleavages havea longand robust ancestry. 5 Butexamples of class-based cleavages are also familiarto most readers. Perhaps most famously, workers in nineteenth-century Britain,taking on the ruling Tories and the landed elite, aligned with capitalists to providemass supportfor freer tradeand the Anti-Corn Law League.A similarkind ofcontest developed in the United States after the Civil War— this time between pro-tradefarmers andprotectionist urban classes— and led to a Republicantariff in 1890that was denouncedby Democrats as the “ culminatingatrocity of class legislation.” Thatboth class and group approaches have found empirical support in avariety ofcontextssuggests the need for awayto bridgethe gulf between them that would specifythe conditions under which one is more appropriate than the other. To this endI applythe standard economic theory of trade to highlight the importance of inter-industryfactor mobility— that is, the ease with which owners of factors of production(land, labor, and capital) can move between industries in the domestic economy.If factorsare mobile between industries, the income effects of tradedivide individualsalong class lines, setting owners of differentfactors (such as laborand capital)at odds with each other regardless of the industry in which they are employed.If factorsare immobile between industries, the effects of trade divide individualsalong industry lines, setting owners of the same factor in different industries(labor in thesteel and aircraft industries, for example)at oddswith each otherover policy. Isurveyevidence on levels of inter-industry factor mobility in six Western economies(the United States, Britain, France, Sweden, Canada, and Australia) duringthe nineteenth and twentieth centuries. 6 Theavailable data indicate that substantialvariation in factor mobility coincides with different stages of industri- alizationand different amounts of regulation.The patterns in thisvariation, and their anticipatedeffects, tbroadlywith the development of tradepolitics in thesenations duringdifferent historical eras. I report ndingsfrom astudyof thetrade cleavages ineach nation that emphasizes the effects of such cleavages on the behavior of politicalparties and peak associations and the lobbying efforts ofmajor industry

4.See Helleiner 1977;and Midford 1993. 5.Smith 1980. 6.These nationsare particularlyattractive candidatesfor close studysince theyhave long histories of democratic governmentand the political disputes over trade ineach havebeen well documented. ClassVersus IndustryCleavages 3 groups.7 Theresults indicate that broad class-based con ict is more likely when levelsof factor mobility are relatively high, and narrow industry-based con ict is morelikely when levels of mobilityare relatively low. I nextdescribe the economic modelsthat make a focuson inter-industry factor mobility appropriate. I then presentevidence indicating substantial changes in levels of labor and capital mobilityin thesix Western nations over the last two centuries. I surveyevidence on tradecleavages and coalitions in each nation in different historical eras. In the conclusionI discussimplications of this analysis for tradepolicy and consider qualications and alternative hypotheses.

TradeTheory, Coalitions, and Factor Mobility

Accordingto the Stolper-Samuelson theorem, trade increases real returns for ownersof thefactor of production with which the economy is relatively abundantly endowed, whileit reduces real returns for ownersof the scarce factor of production. 8 The result dependscritically on the assumption that factors of production, though immobile internationally,are perfectly mobile within the domestic economy. 9 The logic is straightforward:increased trade lowers the price of the imported good, leading to a reductionin its domestic production and freeing up more of the factor it uses relatively intensively(the scarce factor) than is demanded elsewhere in the economy at existing prices.When factor prices adjust to maintain full employment, returns to the scarce factorfall even further than the price of the imported good; meanwhile, returns to the abundantfactor rise even further than the price of the exported good. In this model the perfectmobility of the factors assures that trade affects owners of each factor in the same wayno matter where they are employed in the economy. The implication is that all ownersof the same factor share the same preferences with respect to trade policy. It is thisinsight that encouraged Rogowski to argue that trade coalitions form inthe shape of broadfactor-owning classes and to anticipate broad-based con ict among owners of land,labor, and capital in trade politics. 10 Alternativemodels of the income effects of trade (often referred toas Ricardo-Viner models),in which one or more factors of production are regarded as completely immobilebetween industries, generate very different results. 11 Inthese models the

7.For the full study, see Hiscox1997 and forthcoming. 8.Stolper and Samuelson 1941. 9.Factors are identied as broadcategories ofproductiveinputs and include at least laborand capital. Whereas traditionalHeckscher-Ohlin studies of trade focuson land, labor, and capital, Leamer has dened eleven separate factors: capital,three typesof labor (professional, semiskilled, and unskilled), fourtypes of land (tropical, temperate, dry,and forested), coal, minerals, andoil. Leamer 1984. 10.Rogowski 1989. Classes are dened here simplyin terms offactor ownership:each class comprises thoseindividuals well endowedwith a factor relative tothe economy as awhole;this de nition allowsfor the fact thatindividuals often own a mixof factors.See Mayer1984. 11.See Jones1971; and Mussa 1974 and 1982. The original model was introducedindependently by Jonesand Samuelson; Jones christened it the “ specic-factors” model, and Samuelson named itthe “Ricardo-Viner”model. See Jones1971; and Samuelson 1971. 4 InternationalOrganization returnsto “ specic” factors are tied closely to the fortunes of the industry in which they areemployed. Factors speci c toexport industries receive a realincrease in returns due totrade, whereas those employed in import-competing industries lose in real terms. 12 Underthese conditions, factor speci city can drive a wedgebetween members of the sameclass employed in different industries since they can now be affected quite differentlyby trade. The implication is that political coalitions form alongindustry lines. Thisnotion has guided much of the empirical analysis in the endogenous trade policy literature,which relates variation in import barriers across industries to the incentives andcapacities of industry groups to organize. 13 BothStolper-Samuelson and Ricardo-Viner models examine extreme, or polar, casesin which productive factors are assumed to be either perfectly mobile or completelyspeci c. 14 Thisis a modelingconvenience, of course.Factor mobility is moreappropriately regarded as a continuousvariable, affected by a rangeof economic,technological, and political conditions. Allowing that factors can have varyingdegrees of mobility, the simple prediction is thatbroad class-based political coalitionsare more likely where factor mobility is high, whereas narrow industry- basedcoalitions are more likely where mobility is low.The trade issue should divide societiesalong very different lines when substantial variation exists in levels of factormobility.

Evidence ofChanging Levels ofFactorMobility MeasuringLevels of Factor Mobility Totest the plausibility of the argument, I considerdevelopments in the United States,Britain, France, Sweden, Canada, and Australia over the last two centuries. Todate, analysts in the trade politics literature have not examined the empirical evidenceon mobility in a systematicfashion. Some indirect evidence on mobility hasbeen supplied by studies of the revealed preferences of industry groups and individualsin politics. 15 Ihaverelied here principally on measurements of the differencebetween rates of return for factorsemployed in different industries (specically, on the coef cients of variation for wageand pro t ratesacross

12.Again, the logic is straightforward:a decrease inthe domestic production of an imported good releases anymobile factors foremployment elsewhere inthe economy and thus renders factors specic tothe import-competing industry less productive,driving down their real returns.Returns to the mobile factor rise relative tothe price oftheimported good but fall relative tothe price ofexports,so that the incomeeffects oftrade forowners of this factor dependon patterns of consumption. 13.For example, Anderson 1980; and Lavergne 1983. 14.In the economics literature, the bifurcation is consideredunproblematic since specic-factors effects are generallyregarded as importantin the short term butnot the long term. See Mussa1974; Caves, Frankel,and Jones 1990, 146 – 49;and Krugman and Obstfeld 1987, 81. Itis simplyassumed that, overtime, all factors are perfectlymobile. The problem with this view lies inits neglect of politics:factor ownersnot only choose between acceptinglower returns in one industry or movingto another; they can alsoorganize politically to in uence policyand alter relative prices. 15.The most-cited example is Magee’s studyof group testimony before the U.S. House Ways and Means Committee ontheTrade Act of1974.Magee 1980.Irwin examined county voting patterns in the Britishgeneral election of 1923.Irwin 1995. ClassVersus IndustryCleavages 5 industries).If afactoris highly mobile, rate-of-return differentials should be arbitragedaway by factormovement. Smaller differentials indicate higher mobility. Differentversions of this type of measure have been used previously in studies of labormobility and in recent studies of international capital mobility. 16 Where possible,I comparedresults based on these measures with other indicators of mobility,such as the rate of turnover in labor markets and spending by rms on researchand development and worker training. 17 Overall,the evidence suggests that inter-industry factor mobility has been powerfullyaffected by economicand technological changes associated with industrialization.Yet the impact of those changes, and their timing, has varied substan- tiallyacross nations. Figure 1 reportsavailable data on inter-industry variation in wageand pro t ratesfor eachnation. For the rst halfof thenineteenth century, the only extensive data available are hourlywage rates for skilledlabor (artisans or tradesmen), including carpenters, spinners,weavers, masons, smiths, machinists, and so on. 18 For lateryears, we have dataon wages for separatecategories of skilled and unskilled workers in major manufacturingindustries (at the two-digit SIC level)from whichto calculate coefcients of variation. 19 Dataon pro ts, calculated as value-added minus wage costsper man-hour in eachindustry, are scarce until the 1940s but widely available thereafter,and we havesome direct data on corporation pro ts. 20 Thetemporal trends in the data are immediately apparent in all six economies. Again,recall that lower coef cients of variation indicate higher levels of inter-

16.See, forexample, Krueger and Summers 1988;and Frankel 1992. Inter-industry wage andpro t differentialsare notperfect measures ofmobility,of course.They may sometimes reect otherfeatures offactor markets besidesunderlying mobility levels, including regulations on wages andpro ts, and wage bargainingarrangements. Butthe consequences are unlikelyto be direfor making predictions about thetrade policypreferences offactor owners.Factor mobility is importantto the coalition story precisely because itplays a keyrole in determining the generation of industry rents, and wage andpro t differentialsare theclearest measure ofwhether such rents actually exist. 17.A basic problemwith using indicators of “ows”or factor movements,such as turnoverin labor markets, is thatthere are nocontrols for the incentives to move. Factor owners may ndmovement relativelycheap, but they have little incentive to move if return differentials are low.In the highly integratedinternational bond markets, forinstance, returns on securities are equalizedwith minimal tradingactivity. Frankel 1992. 18.For amore comprehensivediscussion, see Hiscox1997 and forthcoming. For data sources,see the appendix. 19.Only very basic controlshave been applied here forlabor skills, so much caution is required.The resultsmay bere ecting changes in skill mixes orworking conditions across industries,not changes in underlyingmobility. However, Krueger and Summers haveshown that controlling for skill and working conditionsin econometric wage equations(using survey data forindividual workers) is notimportant for estimatingthe relative size ofdifferentials over time. Controllingfor nelydescribed skill differences reduces thesize oftheestimated industryrents across theboard but does little to alter therelative size ofmeasured differentialsat differenttimes. Kruegerand Summers 1987. 20.There are nocontrols here forcross-industry differences inrisk. Changes in pro t dispersionmight bere ecting changes in the relative riskinessof investment in different industries. However, I found similar resultsusing measures ofprots disaggregatedto the four-digit SIC leveland estimating pro t equationsto measure variationbetween thetwo-digit industries while controlling for risk (measured by variabilityin returns over time). Hiscox1996. FIGURE 1. Inter-industry variation in wages and pro ts in manufacturing (coef cients of variation: wages and pro ts) (continued)

ClassVersus IndustryCleavages 9 industrymobility. Consider rst thechanges in thecoefcients during the nineteenth century.In the rst halfof the century wage differentials appear to begenerallyhigh (relativeto those in later years) but falling. Though the data on pro ts are more scarce,a similarpattern is described by inter-industry variation in pro t rates.The trendsindicate a generaland steady rise in levels of inter-industryfactor mobility throughmost of the nineteenth century. Justas interesting are the cross-national differences in this period. Far higher levelsof bothlabor and capital mobility (that is, lower coef cients of variation) are evidentin Britain, where industrialization proceeded most rapidly, than in France, wherea heavierlegacy of industrial regulation remained. Wage differentials were initiallymuch higher in the United States than in Britain early in the nineteenth centurybut fell much more dramatically over time. In the smaller nations of Sweden,Canada, and Australia, which lagged behind the others in industrialization, inter-industryreturn differentials still remained relatively high in the 1860s, and changesare only clearly apparent late in the century. Bytheturn of thecentury, inter-industry wage and pro t differentialshad fallen tohistorically low levels for allsix nations. Differentials reached the lowest levels inthe United States and Britain, which were leadingthe other nations in industrial development,and wage variation was stilltwice as high in France as in Britain at century’s end.But changes were mostapparent around this time in Sweden and Australia,which actually had the lowest levels of wage variation in the sample by 1914.Higher differentials persisted in Canada,where factor markets were separated, notoriously,into distinct regional economies (though the data are scarce). Bythe 1920s and 1930s, the evidence indicates that the long-term decline in inter-industrywage and pro t differentialshad come to a halt.Wage and pro t differentialseven began to rise in some nations — mostlyclearly, in the United States.There was, ofcourse,considerable turmoil in factor markets with the onset ofthe Depression. By the 1950s and 1960s, however, the turnaround in historical trendswas moreapparent: the data show that industry rents were clearlyrising in all sixeconomies. 21 Again,there are some marked cross-national differences. A particularlysharp rise in wageand pro t differentialsoccurred in the United States andBritain after the 1940s; in Sweden and Australia, by contrast, the evidence indicatesa muchslower rise in inter-industry wage and pro t variationfrom the verylow levels attained early in thecentury. The lowest levels of wagevariation in thepostwar period are found in Sweden. 22 Theseno doubt re ect the “ solidarity”

21.These conclusionsare supportedby the available data onlabor turnover. In fact, thepostwar declinein turnover prompted concern among labor economists about a “new industrialfeudalism” in the 1950s.See Ross1958. For analysis of thedownward trend in turnover in the United States andelsewhere, see Ragan1984; and Holmlund 1984. 22.Edin and Zetterberg draw asimilarlysharp contrast between Swedenand the United States, concludingthat wage differentialsare roughlythree times larger inthe United States thanin Sweden. Edinand Zetterberg 1992. Lawrence andBosworth found the same resultswhen testing claims thatwage solidarityand welfare policieshad rendered the Swedish economy “ inexible” in theface ofeconomic shocks.They found instead that employment and output changes by industry in the 1970s and 1980s 10 InternationalOrganization wagepolicy that was theheart of the Rehn-Meidner approach to centralized wage negotiationsduring most of this period as well as Sweden’ s extensiveadjustment assistanceprogram. 23

Sourcesof Change and Cross-National Variation

Thegeneral correspondence between changes in inter-industry wage and pro t differentialsis consistent with the notion that broad exogenous technological and regulatorychanges have led to the observed shifts. 24 Andthe speci c, implied changesin levels of inter-industryfactor mobility twithsome prevailing wisdom aboutthe effects of economic development on factormarkets. Economic historians, for instance,have frequently discussed the lifting of legal restrictions on factor movementthat was acommon,though by nomeansuniform, concomitant of early industrialization,and they widely cite England’ s headstart in deregulation— traceableas far backas the Statute of Arti cers in1563. 25 Historianshave also describedthe way in which,in theearly stages of industrializationin the nineteenth century,major innovations in transportation drastically lowered the costs of factor movementand diminished the importance of geography to economy. 26 Again, Englandled the pack with its ef cient canal system and turnpike roads and the rst railwaymania. 27 Changewas moregradual in the sprawling United States, where inlandfreight rates only began to fall along roads and rivers beginning in the 1820s, alongcanals beginning in the1830s, and along the new railroads from the1850s. 28 InSweden, Canada, and Australia, rapid construction of railroadstook place much laterin the century. 29 Theeffect was thatproduction became less concentrated by region and more subjectto integrated commodity and input markets. 30 Inparticular, land owners couldput farms toa widerrange of alternative uses as distance from markets

revealed thatthe pace ofresource allocationwas more rapidin Sweden than in the United States, Germany,and Japan. Lawrence andBosworth 1987. 23.See Lundberg1985; Hibbs and Locking 1996; and Lindbeck 1974. But for reasons stated earlier (see note17), the distinction is notcrucial.The bottom line is that,as Rivlinpoints out, Swedish workers inhigh wage industrieslike steel didnot face reductionsin living standards comparable tothose faced bysteel workersin the United States iflaid off, since thewages ofU.S.steel workerswere muchhigher comparedto average U.S.wages thanwere theSwedish steel workers’wages comparedto average Swedishwages. Rivlin1987, 13– 14. 24.The correspondence is alsobroadly consistent with “ rentsharing” between capital andlabor. See Katz andSummers 1989.The generally higher variation in pro ts across industries ts withthe standard modelingassumption that physical capital tendsto bemore specic touse thanhuman capital. 25.See Landes1969, 62; North and Thomas 1973; and Olson 1982. 26.See Taylor1951; Davis, Hughes, and McDougall 1961, 276 –96;and North 1965. 27.See Pratt1912; and Clapham 1926 – 38,94. 28.North 1965. The miles ofrailway track inoperation rose from30,626 to 166,703 between 1870 and1890. Martin 1992. 29.Heckscher 1954,213. 30.O’ Brien1983. ClassVersus IndustryCleavages 11 becameless important. 31 Althoughwe haveno detaileddata on farm incomeswith whichto measure the inter-industry mobility of agricultural producers, it seems likelythat they were affectedprofoundly. Production of meatand perishable farm goods,for instance,could be extended to areas much further from urbanmarkets afterthe arrival of therailway; innovations in refrigeratedtransportation reinforced thistrend. General improvements in irrigationand arti cial fertilizers, most apparent inthe late 1800s, also helped to make agricultural production more exible. 32 Notice,too, that farmers caneffectively move between industries, not only by switchingtheir land to alternative uses but also by moving themselves to take up newland suited to alternative production. And in the United States, Canada, and Australiavast areas of differenttypes of land were beingtaken over at thistime by largenumbers of settlers exibleabout what they would cultivate. Technologicalinnovations in methods of production in the nineteenth century alsohad profound implications for inter-industryfactor mobility. The very heart of theindustrial revolution, of course,was theinterrelated succession of technological changesthat substituted machine manufacture for handicraftproduction and revo- lutionizedthe manufacture of textiles, iron and steel, and steam power, rst in Englandand then elsewhere. 33 New millsand factories replaced craft shops and homemanufacture, and the old skills of the artisan class were renderedincreasingly obsolete.A secondcluster of innovationsin the manufacture of electricpower and electricalmachinery and internal combustion engines brought assembly-line pro- ductionand precision manufacturing, and the great shift from nodalto linear ow manufacturingswept through industry in the last two decades of the nineteenth century.34 Muchof the new technology provided new ways to pipe, pump, lift, convey,shape, press, heat, and measure raw materialsand was readilyadaptable to usein alternative industries. 35 Thesedevelopments created a vastdemand for unskilledworkers and increased the ease with which industrial workers could shift betweenmanufacturing industries. 36 However,the apparent decline in inter-industry mobility in these economies beginningin about the 1920s (the timing varies by nation) was mostlikely due to thegrowing complementarity between labor skills and technology. 37 Whereas the keytechnological advances of thenineteenth century had substituted new physical capital,raw materials,and unskilled labor for skilledworkers, later advances began todemand specialized forms ofhumancapital to gowith the new forms ofphysical capital.38 ClaudiaGoldin and Lawrence Katz argue that the key change in U.S.

31.Rogowski 1989, 19. 32.Heckscher 1954,176. 33.Landes 1969. 34.See Landes1969, 305– 307; and Sawyer 1954. 35.Landes 1969, 293– 94. 36.Sokoloff 1986. 37.On skill-technology complementarity, see Griliches 1969;Hamermesh 1993;Bartel andLichten- berg1987; and Fallon and Layard 1975. 38.See Cainand Paterson 1986; James andSkinner 1985; and Sokoloff 1984. 12 InternationalOrganization industrytook place in the 1910s and 1920s and involved moving from assemblyline tocontinuous-process technology— the latter requiring more skilled workers in the managementand operation of highly complex tasks. Growth in the demand for humancapital, or knowledge and skills, has been concomitant with continued technologicalimprovements since that time. 39 Studieshave revealed a clearinverse relationshipbetween investments in industry and rm-specic humancapital and labormobility. 40 Viewedin this light, the recent downward trend in inter-industryworker mobility, andthe upward trend in wagedifferentials, makes considerable sense. 41 Concurrent witha growingemphasis on specialized human capital has been the increasing importanceplaced on specializedphysical capital and knowledge. There has been a hugeincrease in spending on research and development by rms. 42 Inaddition, as Cavesand Porter have argued, barriers to exit and entry for rms haverisen with higherstart-up costs and increased investments in physical capital associated with thegeneral growth in thescale of production. 43 Whereasthe evidence is not strong thateconomies of scale alone act as powerful barriers to entry, 44 moreevidence indicatesthat larger capital requirements result in fewer individualsor groupsbeing ableto secure the funding needed for entry,and then only at interestrates that place themat a costdisadvantage. 45

CoalitionPatterns in TradePolitics

Inlight of the evidence that levels of inter-industry factor mobility have varied substantiallyboth across nations and within each economy over time, the question

39.See Goldinand Katz 1996;and Mincer 1984. One crudeindicator of the trend in theUnited States isthat the ratio of nonproduction to productionworkers grew from0.05 in 1900 to 0.13 in 1929, and to 0.35in 1970. U.S. Department ofCommerce, HistoricalStatistics .Theratio of “ professionaland technical”employees to productionworkers, as measured bytheInternational Labor Organization, grew from0.30 in 1960 to 0.64 in 1990(ILO, Yearbookof LabourStatistics ). 40.See Bloch1979; Parsons 1972; and Ragan 1984. A large partof thestory here is that,because the costof quittinghas increased foremployers, the rational response has beento encouragelonger tenure amongemployees. The general expansion in theuse offringe bene ts tiedto seniority and its negative impact onmobility have been much discussed. See Oi 1962;Block 1978; and Mitchell 1982. 41.Apart from the technological forces at work,several otherchanges have been identi ed as having hada negativeeffect onfactor mobilityin the postwar era. Thegrowing number of two-incomefamilies, unionization,greater progressivityin taxes, and the introduction of sick-leave andmaternity policies have all beenidenti ed as changesrendering job change generally less attractive toworkers. See Holmlund 1984;and Freeman 1976and 1980. 42.Spending by U.S. manufacturing companies on R&D (as apercentage ofsales) rose from0.5 percentin 1950 to 3 percentin 1990. U.S. Department ofCommerce, StatisticalAbstract . The rst industrylaboratory in the United States was establishedby General Electric in1900; by 1931,some 1,600 U.S.companies reported research labs.See Reich 1985,2; andGalambos 1979. 43.Caves andPorter 1979. 44.Scherer 1980. 45.See Hay andMorris 1984; and Geroski and Jacquemin 1985. Strategic considerations also play a rolehere. Since exit by one rm can increase thepro tability of others when scale economiesare large, each rm has anincentive to “outwait”the other, even in theface ofpersistently low returns. Ghemawat andNalebuff 1990. ClassVersus IndustryCleavages 13 remainswhether this variation has produced observable changes in trade coalitions thatare consistent with our expectations. According to the argument advanced earlier,broad factor-owning class coalitions were morelikely to form whenfactor mobilitywas high,whereas narrow industry-based coalitions were morelikely to form whenmobility was low. How exactlywould we recognizesuch differences in coalition patterns? What are theirobservable implications? The term coalition impliesmore than just a setof individualswith shared policy preferences; it impliessome form ofpoliticalactivity (suchas voting, lobbying, protesting, or threateningto doanyof these) that is aimed atin uencing policy. In democratic systems the primary organizational channels throughwhich coalitions of individuals in uence policy are political parties, peak associations,and lobby groups. These are the logical places to look for inferences aboutcoalition patterns. Whatcan we inferfrom thebehavior of political parties in trade politics? The clearestsignals will be broadcastwhen parties are closely associated with particular factor-owningclasses— broad categories of workers, capitalists, or farmers. This hasoften been the case for themajor parties in Westerndemocracies. 46 The British Labourand Australian Labor parties are prime examples of partiestied closely to the workersand the trade union movement, as are the French Socialists and Commu- nists.The old Agrarian party in Sweden,and the Country party (now National party) inAustralia, are good examples of partieswith “ re-electionconstituencies” consist- ingmainly of farmers. Insuch cases linking party behavior in trade politics to coalition patterns is asimplematter. We canmap the class preferences over trade (derived from theStolper-Samuelson theorem) onto a modelof partisan politics. All else constant,the stronger the class cleavages over trade, the more uni ed the par- tiesrepresenting factor-owning classes on either a protectionistplatform (whenrepresenting scarce factors) or a free-tradeplatform (when representing abundantfactors). According to our theory, at high levels of factor mobility, Stolper-Samuelsoneffects should ensure that whole factor classes have more unied views on trade and this should favor party unity. At lowlevels of mobility,Ricardo-Viner effects will create divisions between owners of the same factor inexport and import-competing industries, dividing party constituencies and partyrepresentatives in legislatures— who will have very different calcula- tionsof the net utility associated with supporting a policychange depending

46.Indeed, traditional theories of partysystems locate theorigins of modern parties inthenational and industrialrevolutions that created sharpdivisions between urbanand rural interests andbetween capitalists andworkers. See Lipsetand Rokkan 1967. And much recent workin comparative political economy,in fact, has revealed arm linkbetween major parties anddistinctive class constituenciesin theformulation of economicpolicy. See Hibbs1977; Lange and Garrett 1985;Alesina 1989;and Alesina andRosenthal 1995. 14 InternationalOrganization onwhich industries assume the greatest importance in their particular electoral districts.47 For partiesthat are not so clearly aligned with particular factor-owning classes andinstead have diverse economic constituencies centered around religious, ethnic, orregionalgroupings, we canmake few, ifany, inferences about trade coalitions. 48 Thereis also the possibility that parties may have core constituencies that in- cludemore than one factor-owning class. This will pose a problemif the in- cludedclasses comprise owners of bothabundant and scarce factors: we wouldthen expectthat the party would always be divided internally over trade— by a class cleavagewhen levels of mobilityare high, and by industrycleavages when mobility is low.49 Thepresumption here is thatthe trade issue itself, and the cleavages it generates, isnot suf cient to transform the existing party system. If tradewere theonly issue,we couldexpect that two parties would always take up uni ed and oppos- ingplatforms; they might re ect class-based coalitions when mobility levels were high,or industry-based coalitions when mobility was low.Changes in levels of mobilitywould simply induce partisan realignment around the new cleavage. Althoughtrade has often been a highlypartisan issue, it has seldom (if ever) generatednew party systems or partisanrealignments itself. 50 Theworking assump- tionhere is that party systems are the exogenous product of deeper-seated urban- rural,Left-Right, church-state, ethnic, or regional cleavages, in combination with electoralinstitutions. 51 We facefewer problemsin interpreting evidence about the behavior of encom- passingor peakassociations. The class af liations of confederationsof laborunions, businessassociations, and farm organizationsare clearly delineated. 52 We can simplymap onto these associations the class preferences derived from tradetheory. Allelse constant, we expectsuch associations to be more uni ed in support of coherentprotectionist (scarce factors) or free trade(abundant factors) the stronger

47.Note that the extent to which the trade issue divideslegislative parties underthese conditions shouldbe an increasing function of thedegree towhich production is concentratedgeographically. 48.The Bonapartists and clericalists inthe French Third Republic are goodexamples, alongwith the Ministerialsin Sweden after thereform ofthe Riksdag in 1866. The Partiquebecois inmodern Canada is amore familiar example ofaregionalparty. 49.The best (perhaps only) example istheanti-labor “ Liberal”party in Australia, formed in 1909by amerger between theFree Trade Party(representing rural interests) andthe Protectionists (representing urbanbusiness). 50.Again, the Australian case providesone example: nationalFree Trade andProtectionist parties competed(along with Labor) after federationin 1901. As noted,however, the trade issue was quickly overwhelmedby more rudimentaryclass issues (taxation,welfare, nationalization,labor regulation) and thetwo parties joinedforces toconfront Labor. 51.For a discussionof the debate about the relationship between cleavage structuresand party systems, see Cox1997, 19 –27.Coxargues forcefully that electoral institutionshave powerful effects “in interactionwith cleavages” in determining party structures. 52.There is oftenmore thanone peak association for each factor-owningclass, ofcourse.In France, forinstance, the non-communist labor union confederation, the Confe ´de´rationfranc ¸aise de´mocratiquedu travail,still competes withthe older, more radical Confe´de´rationge ´ne´rale dutravail. ClassVersus IndustryCleavages 15 theclass cleavages over trade— that is, according to our theory, the more mobile the factorsof production. We shouldexpect, for instance,that national federations of laborunions, like the Trades Union Congress in Britain or the AFL-CIO inthe UnitedStates, will express rmer andmore cohesive positions on the trade issue whenlabor is moremobile between industries; when levels of mobilityfall, the gap betweenthe preferred trade policies of unionsin different industries will increase, creatingmore disagreement. Finally,what inferences about coalitions can be made based on the behavior of lobbygroups? Industry-based labor unions and management associations are the logicalmodern conduits for industrypressures in trade politics, and we should expectthat lobbying by suchgroups will be shaped by industrypreferences (derived inthe Ricardo-Viner model). 53 Allelse constant, the stronger the industry cleavages overtrade, the more active the industry groups in lobbying for protection(in import-competingindustries) or for freer trade(in export industries). At lowlevels ofmobility,Ricardo-Viner effects tie factor returns more closely to thefortunes of eachindustry, giving labor unions and management associations an incentive to lobbyfor tradepolicies that will confer rents by eitherlimiting import competition orboosting exports. At highlevels of mobility, industry rents are eliminated, and Stolper-Samuelsoneffects mean that any bene ts to be had from lobbyingwill be dispersedamong all other owners of the same factor (that is, they have the nonexcludablequality of a publicgood). 54 Table1 summarizesthe anticipated effects of variationin levelsof mobility and coalitionpatterns on the behavior of class-af liated political parties, peak associations,and group lobbying. For simplicity,variability in levels of factormobility is rathercrudely categorized in Table 1; in practice, categorizing an economy in absoluteterms (as eithercloser to the Stolper-Samuelson or to the Ricardo-Viner extremeat any particular time) may be dif cult. Relative assessments of mobility levelsare much more feasible when considering changes in aneconomyover time or,perhaps more problematically given the data limitations, when comparing one economywith another. 55

53.Industry groups, like parties, are here assumed toexist for exogenous reasons (orto be readily formedad hoc if factor ownersin an industry have an incentive to lobby)— that is, collective action problemsare inthe “ceteris” considered“ paribus.” 54.This last pointexposes a gravebias in Magee’s famous“ test”of the Stolper-Samuelson theorem. Inthat test Magee assessed whetherlabor unions and management associations,when lobbying on trade legislationbefore Congress in 1974, lined up according to factor orindustry interests. Magee 1980. Magee’s test improbablyrequires that industry groups are equallylikely to lobby on behalf of theirfactor class whenmobility levels are highas theyare whenmobility is lowand they can winindustry-speci c rents. WhileI am here concernedwith general measures offactor mobilityin theeconomy, other analysts haveexamined individual industries and rms andthe speci city of their assets (judgedtypically by reference tolevels ofR&D spendingand concentration ratios). Such measures havethen been related to theenergy with which industries or rms lobbyfor rents, and there are strongindications that lobbying andmobility are negativelyrelated. See Frieden1991; and Alt et al.1999. 55.For simplicity, mobility levels are treated as generalto all factors here,since, as theevidence suggests,broad exogenous forces haveshaped mobility levels amongfactors inaverygeneral fashion. 16 InternationalOrganization

TABLE 1. Anticipatedeffects of variation in levels of factor mobility

Level offactor Effect onclass-based parties mobility Coalitions andpeak associations Effect onindustry groups

Low Industrycoalitions Internally divided over trade Lobbyactively for protection issue andadopt ambiguous inimport-competing policypositions industriesand for freer trade inexport industries

High Class coalitionsInternally uni ed on the Inactive trade issue andadopt coherentprotectionist (when representingscarce factors) orfree-trade (abundant factors) positions

We canuse these simple relationships to assess whether coalition patterns in tradepolitics appear to have been shaped by changes in levels of factor mobility. Toprovide for easycomparisons over time, the analysis for eachnation is dividedinto four parts dealing with four reasonably distinct historical periods: 1815–69, 1870 –1914,1919 –39,and 1945– 94; the available evidence on parties,peak associations, and industry groups for eachof these periods will be considered. 56

TheUnited States Accordingto thetheory, broad factor-owning class coalitions in U.S. tradepolitics were morelikely to form duringperiods of veryhigh factor mobility (roughly, the latenineteenth and early twentieth centuries). In periods of lowermobility (the early nineteenthand late twentieth centuries) narrow industry-based coalitions were more likelyto form. Theseanticipated effects are described in Table 2. The table includes the classications for factorendowments (abundance or scarcity) for eachcase from Rogowski’s 1989study, which overlaps for almostthe entire period covered here. 57 Thedata on rate-of-return differentials reported in Figure 1a are used here to distinguishrelative levels of mobilityin eachcase. To facilitate comparisons across cases,mobility levels were designatedas “high”when the mean coef cient of wage

56.For the full study on which this discussion is based,see Hiscox1997 and forthcoming. 57.Rogowski used data onindustrialization,population, and land area toclassify nationsaccording totheir relative factor endowments.For the 1945– 94 cases Ihavealso referred torecent, more sophisticatedempirical workon measuring factor endowments—speci cally, the study by Bowen, Leamer, andSveikauskas 1987. ClassVersus IndustryCleavages 17

TABLE 2. Anticipatedand observed outcomes in the United States

Outcomes: Class- Factor basedparties and Period endowmentsMobility Prediction a associationsIndustry groups

1815–69 Abundant land; LowIndustry Parties splitalong Very active; vast scarce capital coalitions regionallines; more number of and labor unied in 1850s petitionsfrom withDemocrats groups to opposingRepublican Congress protectionism

1870–1914 Abundant land; High Class Republicansstrongly Sharpdecline in scarce capital coalitions favoredhigh tariffs; groupslobbying and labor Democrats congressional championedcuts in committees upto tariffs; votingalmost turnof century unanimous

1919–39 Abundant land Intermediate; MixedParties adheredto Increased andcapital; falling oldplatforms; some lobbyingactivity scarce labor divisionamong leading to Democrats with Smoot-Hawley realignmentof labor Act in 1930

1945–94 Abundant land LowIndustry Parties andpeak Active lobbying; andcapital; coalitions associations number of scarce labor b internallydivided groupstestifying since 1950sand took rose swiftly ambiguouspositions despite delegationfrom Congress to executive

variationwas greaterthan 16, “ low”when the mean was lessthan 12, and “intermediate”otherwise. 58 Theeffects anticipated by the theory, based on levelsof factormobility, trather wellwith some stylized facts about U.S. tradepolitics. The tariff debatewas a

58.Since the median mean coefcient for these cases lies between 12.4and 16.1, this was thesimplest rulethat suggested itself. 18 InternationalOrganization predominantlylocal group-based affair atthebeginning of thenineteenth century. 59 Inthe years after 1815, memorials from groupspoured in to Congress, alternately “prayingfor” or “remonstratingagainst” a changein thetariff. 60 Southernfarmers, particularlycotton and tobacco growers reliant on exportmarkets, strongly opposed protection,but farmers growingwool and hemp in the northern and border states advocatedhigher tariffs. The iron and textile industries of the Northeast were staunchprotectionists; but the commercial, shipping, and railroad interests along the Atlanticcoast, and manufacturers of products like cotton bagging in the South, stronglysupported free trade.These divisions cut across party lines and were reected in congressionalvotes on tradelegislation that split the parties internally. 61 Attemptsto manipulate these divisions led to the infamous “ Tariff ofAbomina- tions”in 1828when Martin Van Buren’ s planto usea protectionistbill to splitthe Adamsparty went awry assizeable factions of both parties voted in its favor. 62 Whenthe Democrats announced the rst ofcial party platform in 1839,they were deliberatelyvague on thetariff. 63 Onlyin the1840s did majorities of thetwo parties assumeclearly opposing positions and begin to appeal to broader class-based coalitions. 64 Inthe years following the Civil War, thetariff became the partisanissue. The Republicansappealed to urban classes, particularly in the Northeast and Midwest, whohad long favored protection, and every one of its platforms after 1860 emphasizedthe value of a hightariff. 65 TheDemocrats’ support base was largely agriculturaland southern, and from 1876on, their platforms advocated a tariff

59.See Stanwood1903, vol. 1; andPincus 1977. 60.The lobbying came almost exclusivelyfrom groups based in particular cities andtowns, often representingmore thanone industry and an assortment offarmers, manufacturers, andworkers (“mechanics”). Thehigh costs associated withcommunications meant thatraising a petitionon arange ofproducts within a citywas stilleasier thanorganizing producers of oneproductin several cities. Pincus 1977, 58. 61.See Taussig1931, 25– 36; and Stanwood 1903, 1:240 – 43.Average partycohesion indexes for voteson major trade billsin the House (on a hundred-pointscale) were only2.8 (1824), 20.6 (1928), 35.7 (1832),43.5 (1833), 44.1 (1842), 73.3 (1846), and 59.6 (1857). Although elections still turned mostly on personalcontests in the “ rst”U.S. party system, whenthe Federalists squaredoff against Jefferson’ s Republicans,the development of distinctivenational parties withpredominantly urban (Adams’ Repub- licans/Whigs)or agrarian (Jackson’ s Democrats) bases ofsupport was clearer bythe early 1830s. Stanwood1903, 1:240 –43. 62.Taussig 1931, 88 –98.The apparent aim was topresent a billthat would repulse free-trade supportersof Adams inNew Englandwhile allowing protectionist Jackson supporters in theNorth and West tobeseen as championingtariffs (especially forwool and hemp growers). Southern Jacksonians were persuadedto withhold amendments andassured, mistakenly, that such a billwould be defeated by vote. 63.Stanwood 1903, 2:38. 64.In 1845southern Democrats helda conventionaimed at solidifyingan alliance between southern andwestern agriculturalistsin opposition to high tariffs. The Whigs, meanwhile, appealed directly to the laborvote, with the argument linking the tariff tohigh wages artfullymade innumerous articles by Horace Greeley. Commons1909, 487. In 1856 the Democratic platform nallycalled for“ progressive free trade throughoutthe world,” and in the following year theRepublicans openly endorsed protectionism—aposition they tied neatly to adefense ofthe rights of workersand the rejection of the slave laborof theSouth. Foner 1970. 65.See Rogowski1989, 44; and Stewart 1991,218. ClassVersus IndustryCleavages 19 leviedfor revenuepurposes only. 66 The“ longdepression” intensi ed rural demands for tariff reform andremonetization of silver and sparked the Greenback and Grangermovements and the Farmers’ Alliance. Cleveland fanned the ameof class conict in 1887 by devoting his entire address to Congress to an attack on Republicanprotectionism. Thereafter, large partisan swings in policycoincided with eachchange in control of Congress, and votes on all trade legislation displayed extremelyhigh levels of partycohesion. 67 Whenthe dispute between Democrats and Populistsover silver was nallyresolved by “Fusion”in 1896, severing the party’ s tiesto pro-goldsupporters in theEast, the urban-rural cleavage was placedsquarely atthe center of U.S. politics. 68 Bythe 1920s, however, signi cant rifts hadgrown within both parties over thetariff issue.Democrats in Louisian aandTexas were luredaway from the party’s free-tradeposition by new agricult uralduties on sugar and meat. Republicansin the Midwest and East, in uenced by demands from nancial interestsand export industri es,broke ranks and opposed new protecti onistbills. Votingon passage of the infamousl yprotectionistSmoot-Haw leyAct in 1930 revealedlevels of partycohesion lower than any in the United States since the 1870s.69 Meanwhile,lobbyingbyindustry groups increased dramatic ally.More groupstesti ed before the House Ways and Means Committe eonthe Smoot- Hawleybill than on any trade legislat ionsince the Civil War. 70 In the 1932 campaign,Rooseveltrefusedto stake out a clearpositio nfor theDemocrats on trade.71 Partof the problem for theDemocrats was theirgrowing reliance on supportfrom labor,a traditionallyprotecti onistbloc. Though they pushed throughthe Reciproc alTrade Agreement sAct(RTAA) in1934, allowing for bilateralnegotia tionswith trading partners, they imposed a rangeof newimport quotasin the 1930s. 72

66. CongressionalRecord ,15August 1949, 12902. However, an unexpected obstacle for the Democratic tariff reformers inthe early 1880swas astrongnorthern component of the party, led by Samuel Randallof Pennsylvania (see Verdier 1994,73). 67.Average partycohesion indexes for votes on major trade billsin the House were 94.2(1888), 98.7 (1890),90.2 (1894), 98.9 (1897), 97.4 (1909), and 94.3 (1913). 68.The American Federationof Laborand the National Association of Manufacturersboth strongly endorsedthe protectionist Republican platform. 69.Average partycohesion indexes for votes in 1930 were 79.0in the House and 62.5 in the Senate. 70.A totalof seventy-eightseparate industrygroups (trade associationsand labor unions) appeared beforethe committee; onlyforty-eight testi ed on the Fordney-McCumber bill in 1922, and in previous years thenumbers were evenlower— thirty testi ed in 1913, and only twenty-one testi ed in 1909. The Smoot-Hawleytariff remains somewhat enigmatic.On one hand, Schattschneider’ s classic analysis places these groupsat center stage.Schattschneider 1935. On the other hand, the act was stillvery much apartisanpiece oflegislationsponsored by Republicansand opposed by Democrats. See Pastor1980, 81; andVerdier 1994,191– 92. 71.He supportedthe plank in the platform, co-authored by Cordell Hull, that returned the party to Wilson’s idea ofa “competitivetariff” and advocated reciprocal trade treaties. Butin the campaign he supporteda cost-equalizingapproach that he admittedwas “notwidely different from that preached by Republicanstatesmen andpoliticians.” Quoted in Haggard 1988, 106. 72.See Haggard1988, 92; and Verdier 1994,188. Neither theAFL nor the CIO tooka positionon theRTAA oritsextension in 1937. 20 InternationalOrganization

In1948 the Republicans altered their platform, too, removing their old pledge to endthe RTAA program.And in 1953 Eisenhower championed trade liberalization asan essentialcomponent of postwarU.S. foreignpolicy. The party’ s supportbase amongbusiness was splitbetween export-oriented sectors and those industries that beganto meetstiff import competition in the 1950s and 1960s, such as textiles and steel.73 TheDemocrats faced their own problems. The AFL-CIO voicedlukewarm supportfor theRTAA programduring the postwar boom but withdrew it when cheapimports began to pose a seriousthreat to wages and jobs in several major industries. 74 TheDemocrats’ rural support base divided along commodity lines over trade.75 Growingpressure from industrygroups exacerbated the problem for party leadersand resulted in a spateof speciallegislation in Congress and a newarray of nontariffbarriers aimed at protecting faltering industries. 76 Bythe 1990s, the old classcoalitions were indisarray over the trade issue, and the two parties were rent byinternal divisions over major trade legislation. 77

Britain Levelsof factormobility were far higherin Britain than elsewhere in the early part of thenineteenth century. According to the theory, the development of class coalitions shouldhave occurred earlier in Britain and should have been replaced by industry coalitionsduring the mid- to late twentieth century when levels of mobility declined rapidly.These expectations, and a summaryof the ndings,are presented in Table 3. Withthe revival of tradeafter the Napoleonic Wars, debatesin Britain centered onthe protectionist Corn Laws thatrestricted grain imports and were defended resolutelyby theland-owning elite. 78 Pressure for reform camemost strongly from textileproducers in Leicesterand Manchester, anxious to reducelabor costs. 79 But inthe 1830s the Anti-Corn Law Leaguedrew amass followingamong both the urbanmiddle and working classes and attracted support from theworking-class Chartistreform movement. 80 Theeffects were quicklyapparent in Parliament where

73.The two general business associations, the NAM andthe Chamber ofCommerce, providedonly cautioussupport for multilateral trade negotiationsand, constrained by internalcon icts ofinterests, took few positionson more controversialtrade issues.See Friman1990, 65– 66; and Bauer, Pool, and Dexter 1963,334 – 36. 74.See Rogowski1989, 120; and Hughes 1979, 23. 75.The American Farm Bureautook positions on some broadtrade measures, generallysupporting GATT negotiations—from which agricultural trade barriers hadbeen excluded— while opposing preferences forimports from developing nations. But it left themost important lobbying up tocommodity- specic farm groups.Destler andOdell 1987, 42. 76.On the rise oflobbying,both for and against trade liberalization,see Destler andOdell 1987. When major trade billscame beforethe House committee, forty-twoindustry groups testi ed in 1955, sixty-threetesti ed in 1962, fty-sixin 1974, thirty-nine in 1993, and fty-fourin 1994. 77.Turner and Schneier 1970, 71. Average partycohesion indexes for votes on trade billsin the Housewere 43.9(1955), 43.3 (1962), 36.3 (1974), 33.0 (1993), and 33.0 (1994). 78.Toynbee [1884] 1958, 5. 79.McCord 1958, 16. 80.Magnus 1954, 65– 66. ClassVersus IndustryCleavages 21

TABLE 3. Anticipatedand observed outcomes in Britain

Outcomes: Class- Factor basedparties and Period endowmentsMobility Prediction a associationsIndustry groups

1815–69 Abundant labor High Class Liberalsstrongly Littleindependent andcapital; coalitions supportedfree activity; scarce land trade;Tories combinedin Anti- protectionist,but CornLaw League splitby Peelite factionin 1846

1870–1914 Abundant labor High Class Liberalsand Few groupsgave andcapital; coalitions Labour gave testimonyto scarce land strong,uni ed commissions supportfor free trade;Tory leaders censored protectionist members

1919–39 Abundant labor Intermediate; Mixed Toriesadvocated Activityincreased andcapital; falling tariffs under after onsetof scarce land Baldwinbut were Depression divided;Labour and TUC supportedfree trade until Depression

1945–94 Abundant labor LowIndustry Toriesand Labour Very active in andcapital; coalitions splitin votesover pressuring scarce landb entrance toEC planningagencies andGATT rounds; forassistance CBI andTUC also internallydivided

Liberalsand Radicals backed the league wholeheartedly and Tories voted strongly againstliberalizing bills. 81 WhenPeel pushed ahead with repeal of theCorn Laws in1846 after a seriesof food crises, he split the Tories irrevocably; the expelled

81.McCord 1958, 17. Average partycohesion indexes on votesto abolishthe laws were 78.6(in 1834),84.1 (1842), and 82.5 (1846). These compare veryfavorably with estimated cohesionindexes 22 InternationalOrganization

Peelitefaction (which included the young Gladstone) gravitated to the Liberal fold.82 Withthe “ puried” Tories increasingly isolated on the trade issue, Liberals succeededin eliminating all protectionist duties by 1860. In1867 the second Reform Act nearly doubled the size of theelectorate and, by enfranchisingmore members of the urban working and middle classes, created a massivebase of supportfor free trade. 83 Bytying their party to the free-trade cause, Gladstone’s Liberalsforged a hugeelectoral support base. The Tories could not ignoredemands from ruralsupporters for protection,but to openly endorse tariffs wouldhave been electoral suicide. 84 Theybegan to draw moresupport from the expandingVictorian middle class, which grew defensiveon laborand social issues butfavored trade openness. 85 Toryleaders responded by cultivatingan ambiguous positionon the tariff issue. 86 Theparty came under little pressure from industry lobbies,87 butit could not ignore the old divisions within the ranks inde nitely. In 1903twenty-seven Unionist backbenchers challenged the party leadership on the tradeissue by supportingBaldwin’ s Tariff Reformprogram. 88 Thebickering helped ensurethe continued Liberal dominance in Parliament and guaranteed that British tradepolicy remained steadfastly open well into the twentieth century. After thedissolution of thewartime coalition under David Lloyd George in 1922, thetariff becamegrist for openpartisan competition, pitting the Liberal-Labour allianceagainst the Conservatives. In 1923 Baldwin made the Tories’ commitment toprotection the focus of the campaign and so virtually handed victory to Mac- Donald.89 In1929 he repeatedthe mistake. But the onset of adepressiondiscredited MacDonald’s policiesand broke apart the Liberal-Labour alliance. Business and middle-classsupport swung behind the Tories, who were sweptinto of ce in1931

onall othervotes in the correspondi ngsessions of Parliament:67.9 (1834), 58.4 (1842), and 58.4 (1846). 82.Bradford 1983, 159. Tory supporters had been divided between thosewhose interests were bound upexclusively in agriculture and those who had diversi ed by investing in manufacturingand railways. See Schonhardt-Bailey1991; and Aydelotte 1962, 290 – 307.Peel himself hadinterests incotton spinning,and Leaguers notedwryly that he had “ commercial bloodin him.” 83.Cox 1987, 10. 84.As LordDerby put it at thetime, theworking class “can,if it chooses,outvote all otherclasses puttogether.” Quoted in McKenzie 1963,147. 85.Ostrogorski 1902, 267– 68. 86.Zebel 1940, 173. Party leaders censuredbackbenchers from speaking out on the issue andavoided anydiscussion of a changein policy. Brown 1943, 65. They had an added incentive for shelving the trade issue after 1886when they were joinedby a factionof theLiberal party, the Liberal Unionists, who had splitwith Gladstone on Irish home-rule and held strong pro-trade views. Lubenow 1988. Votes in Parliament,limited to proposals for minor policy adjustments, produced cohesion indexes of 91.1 (1881), 94.6(1894), 95.2 (1897), and 92.6 (1906). 87.Verdier 1994,84 – 88.Only eleven trade associationsresponded to inquiries from a Royal Commissionon trade andindustry in 1886, and four of these expressedno particular opinion. Ibid., 87–88. 88.The drive behind Tariff Reform came notfrom industry demands or agrarian dissent, but from growingconcerns about imperial ties andthe need for preferential trade policy.See Verdier 1994,140; alsoMarrison’ s (1983)response to Semmel (1960)and Rempel (1972). 89.Lowe 1942, 82– 83. ClassVersus IndustryCleavages 23 andraised tariffs in1932. Divisions over the trade issue grew withinthe parties. 90 Amongbusiness interests, the old consensus dissolved and industries began more concertedlobbying efforts aimedat securing protection. 91 Onthe Left, where there hadbeen little dissent from theTrade Union Council’ s supportfor free trade, 92 after 1930key unions in the woolens and iron and steel industries began demanding specialprotection. 93 Bythe1960s, the Tories and Labour had both committed themselves to aprogram ofplanningthat included subsidies targeted to major trade-affected industries as a counterweightto GATT-mandatedtariff reductions. 94 Theapproach helped to paper overdeep rifts in each party’ s coreclass constituency, while responding to lobbying pressurefrom individualindustries. 95 Agrowingdivision separated Labour mod- eratesfrom the“ Bevanite”Left wing of the party that, linked to powerful unions in themining, steel, and textile industries, supported unilateral tariff increasesin violationof GATT andvehemently opposed British entry into the European Community.96 TheTrade Union Council itself was deeplydivided along industry linesand vacillated on tradeissues. 97 Meanwhile,on the Right, tensions also grew amongthe Tories. When the Heath government reacted to therecession in theearly 1970sby providing selective protection for majorindustries, 98 itdrew intense criticism(especially from smallbusiness) at party conferences. 99 In the 1980s divisionsamong Tories over European integration widened further as the Right wingof the party became increasingly vocal in its opposition.

France Thetheory suggests a verydifferent history for tradecleavages in France, where levelsof factormobility have been much lower than elsewhere during the last two centuries.Industry-based cleavages over trade were morelikely than class con ict for mostof the period considered here. The likelihood of a strengtheningof class

90.Average cohesionindexes in voting on trade legislationfell to66.3(1921), 58.0 (1924), and 67.8 1932). 91.See Turner1984, 48; and Verdier 1994,176. The Federation of BritishIndustry came outin favor of tariffs. 92.See Carr andTaplin 1962, 341; and Boyce 1987, 124 –25. 93.Verdier 1994,174. 94.See Blank1973; and Verdier 1994,265. 95.Indeed, trade associationsand labor unions from major industrieswere grantedspecial access to planningagencies. See Hall 1986,56; Grant 1980; Shon eld 1965, 151– 52; and Hayward 1974,401. This was amajor feature ofwhatBeer labeledthe “ new grouppolitics” in Britain.Beer 1965. 96.Wilson applied for EC entryin 1967 but opposedthe same moveby theHeath governmentin 1971 after theLeft winggained strength (see Nairn1972). In theend he resolvedthe matter forthe party by holdinga referendumon the issue in1974. When the Left succeeded inradicalizing the party platform againin the 1980s, however, it reinserted a pledgeto withdrawfrom the EC andimpose import barriers. King1977. In the one vote on ECentryin Parliament in1971, the cohesion index for Labour was only 46.5(69 for, 189 against). The cohesion index for the Tories was 75.7(282 for, 39 against). 97.See Rose 1980,233; and Hall 1986,60. 98.See Ganz 1977,40; and Young and Lowe 1974. 99.See Gamble andWalkland 1984, 78 –81;and Grant 1980. 24 InternationalOrganization

TABLE 4. Anticipatedand observed outcomes in France

Outcomes: Class- Factor basedparties and Period endowmentsMobility Prediction a associationsIndustry groups

1815–69 Abundant labor LowIndustry — Highactivity; andcapital; coalitions great numberof scarce land petitionsfrom groups to Assembly

1870–1914 Abundant labor LowIndustry Republicans, Highactivity; andcapital; coalitions Bonapartists, industrylobbies scarce land monarchists,and mountedmajor Radicals divided; effortsto alter Socialistssupported outcomes of free trade Chamber hearingson tariff

1919–39 Abundant labor Intermediate Mixed Increase in Grouplobbies andcapital; partisanship; active in scarce land Socialistsfavored pressuring reform,Radicals committees for opposedand ended tariff alterations FrontPopulaire andin treaty bargaining

1945–94 Abundant labor LowIndustry Gaullistsand Planningprocess andcapital; coalitions Socialistsdivided dominatedby scarce landb overtrade andEC, intenseindustry as were FNSEAand lobbying CNPF(Conseil nationaldu patronat franc¸ais); CGTmore protectionistthan CFDT

coalitionsmay have risen marginally in the 1920s and 1930s, with a slight increasein measured levels of mobility. For themost part, however, the French economystands apart from theothers as especiallyfertile ground for theformation ofnarrowindustry-based coalitions. Table 4 summarizesthe anticipated effects and ndings. ClassVersus IndustryCleavages 25

Theabsence of democratic institutions and party competition in the turbulent yearsafter 1815 makes testing of thetheory against French politics dif cult in the rst partof thenineteenth century. However, no matterhow the political institutions changedin these years, active lobbying by industry groups appears to have been a constantfeature. Under Louis XVIII, graininterests won higher tariffs evenas an arrayof agrarianproducers (led by winemakers and silk growers) pushedfor freer trade.100 Underthe July Monarchy, industries oodedthe Assembly with petitions andsent leaders to represent them in Paris. 101 An1834 national survey on trade foundthat many chambers of commerce held very protectionist views (including thoserepresenting cotton weavers and iron producers), but in commercial circles andexport industries (such as nefabrics and metal goods) freer tradewas rmly supported.102 Thewine makers of Bordeaux took the initiative in forming a free- tradeassociation in 1846, in thewake of thedramatic reform inBritain.But, unlike theAnti-Corn Law League,it never mobilized a classbase of support. 103 Only under theauthoritarian rule of Louis Napoleon was tradepolicy reformed by a seriesof bilateraltrade treaties in the 1860s. 104 After thecollapse of theSecond Empire, a complexmultiparty system began to takeshape in the1870s. By 1872there were eightmajor parties contesting elections. Onthe tariff issue,positions were poorlydelineated and the parties were internally splitin votes in the Chamber of Deputies. 105 Onthe Right, most Bonapartists remainedloyal to the emperor’ s pro-tradelegacy, while monarchists of various stripestended to favor agricultural tariffs orwere dividedaccording to how trade affecteddifferent landed interests. On the Left, Socialists tended to support freer trade,but Radicals were lessclearly positioned. 106 TheRepublicans, who emerged asthe dominant centrists in Parliament with strong support among urban business interestsand the middle class, were especiallydivided. The divisions deepened whenthe trade treaties with Britain and Belgium came up for renewalin 1878. Whenthe Chamber began hearings on theissue, it was swampedby lobbyists. 107 By

100.See Caron1979, 95– 97; and Brogan 1967, 405. 101.See Gille 1968,209 –49;and Verdier 1994,98. In 1840iron masters organizedinto a national committee tolobby against trade liberalization.Coal miners organizeda committee in1851 to demand protectionfrom imports of Britishcoal. Priouret 1963, 69 –71.Machinebuilders also organized their own committee, butthey lobbied for freer trade. 102.See Caron1979, 96; and Smith 1980, 90. 103.Russell 1969, 97– 98. Keenly aware ofthevery different political context in France,Cobden had advisedhis friend Bastiat that“ thefree trade movement,which was formedon abroadbase inEngland andforced upon the legislature, must in France start withthe legislators and be imposedon thepeople.” Quotedin Russell 1969, 84. 104.Dunham 1930. Even then, the government was forcedto adopt a rangeof measures aiding particularinterests harmed bythe treaties, includinga programthat subsidized land owners and provided loansto industry. See Fohlen1956, 293; and Dunham 1930, 150. 105.See Gourevitch1986, 104; and Elwitt 1975, 270 – 72.Average partycohesion indexes on trade voteswere 24.5(1872), 29.7 (1878), and 47.1 (1892). 106.Verdier 1994,101. 107.For a detailedaccount, see Smith1980. Protectionist industries lobbied independently and also combinedforces intheAssociation de l’industriefranc ¸aise (AIF).The largest contingentin the AIF came 26 InternationalOrganization

1892,when the treaties expired again, protracted agricultural recession had pushed farmers, andthe agrarian peak association, the Socie ´te´desagriculteurs de France (SAF), towardprotectionism. 108 TheMe ´linegovernment avoided a repeatof 1878 witha compromisethat assured major industries duty-free imports of key raw materialswhile providing new assistance for arangeof agriculturalproducers and manufacturers. 109 Thecompromise removed the trade issue from thepolitical spotlightand helped the Republicans dominate the French Parliament until World War I.110 Inthe years after 1919 Parliament extended wartime legislation authorizing the governmentto adjusttariffs inlinewith exchange-rate changes, and industry groups were ableto wield enormous in uence over the advisory committees in charge of settingtariff rates. 111 Thegoverning Republicans and Radicals sought to maintain thebalance between competing interests that had been cemented in the Me ´line Tariff. Representativesof labor,however, began expressing a morecoherent form ofclass sentiment: the Socialists and Communists, along with the union peak association,the Confe ´de´rationge ´ne´raledu travail (CGT), allfavored greater openness.112 Ittook a sharpdecline in commodity prices in 1930 to break the Republicangrip on power.The Steeg government collapsed in 1931,paralyzed by itsunwillingness to choose between urban and rural interests. The new Radical governmentimposed import quotas on arangeof farm productsbut could not avert economiccrisis. In 1936 the Radicals joined with Socialists (under Blum) and Communistsin a novel“ red-green”coalition, the Front Populaire. 113 The new alignment,ostensibly pitting farmers andworkers against business, was plaguedby conicts and short-lived. Fearing that Blum planned to use emergency powers to cut agriculturalprotection in 1937,the Radicals deserted the alliance. The new Radical governmentrestored old duties and quotas and courted support from Republicans andbusiness interests. 114

fromtextile manufacturers; ironand steel producersand the coal-mining industry were alsoprominent participants.Support for free trade emanated predominantlyfrom the major centers oftrade, nance,and transport.Major sections of industry joined them, including the woolens and silk industries and the wine producers,and helped to form a free-trade association(the Association pour la de´fense dela liberte´ commerciale) as acounter-weightto the AIF. Some seventy-three separate industrygroups offered testimony. 108.Golob 1944, 43. 109.See Verdier 1994,126; and Smith 1980, 151– 81. 110.As Smithpoints out, the 1892 tariff, “ servedto mitigate strife amongstcapitalists indifferent linesor in different sectors byproducingan explicit government commitment toa mixed,variegated, and balancedeconomy in which all major interests couldenjoy a certain levelof security.”Smith 1980, 21. 111.Verdier 1994,164. In fact, between 1919and 1922 the calculation of duty multipliers was handledby a committee staffed largelyby representatives oftrade associations.Naudin 1928, 89 – 91. 112.Verdier 1994,162. 113.See Wright1964, 64; and Dupeux 1959. 114.Sauvy 1984, 151. In the vote on granting the Chautemps government power to adjust tariffs in 1937,the average partycohesion index was 84.9.Socialists and Communists voted unanimously against thebill, whereas Republicanswere split. ClassVersus IndustryCleavages 27

Underthe continu eddominan ceof theRight and Center-Ri ght,trade politic s inthe 1950s and 1960s develop edlittle partisan avor.The creation of the EuropeanEconomic Communi tyin 1958 placed limits on discretionarychanges inthe tariff andshifted the focus to industri alpolicy. The famous plannin g processwas powerfullyshapedby industry groups, as bureaucra ticagencies beganto act as internal lobbyis tsfor theirsectoral “ clients”. 1 15 As inBritain, therewas aclearsplit between the large, concent ratedindustri es,which tended todo very well in lobbyin gfor rents,and small business ,whichdid not. 116 Amongfarmers, opinionsaboutpolicy were divided:thepeak associati on,the Fe´de´rationnationa ledes syndicat sdesexploit antsagricole s(FNSEA),com- prisedaround forty speciali zedfarmer groupsthat took very different position s on trade.117 InParliamen t,Gaullistand Republi canparty members were divided overtrade and industri alpolicy in the 1970s and 1980s. 118 AmongSocialis ts, therewas strongsupport for Europeanintegrat ionand liberali zationfrom leading guresof the“ secondLeft” , whileLeft wingers associat edmoreclosely withblue-col larunions and the CGT championedprotecti on. 119 Ingovernme nt theparties gravitat edtoward similar, amorphou sapproachesto policy: negoti- atedtariff cutswere coupledwith large servings of nontariff protecti onandan arrayof selectiv estateinterven tionaimed at aiding troubled and “ strategic” industries.

Sweden Thetheory predicts an altogether different pattern of developmentin Sweden,where levelsof factor mobility rose dramatically at the turn of the century and remained quitehigh in laterdecades. We anticipatea rapidreshaping of tradepolitics around classcleavages late in thenineteenth century. And, since mobility levels remained relativelyhigh in the twentieth century, the formation of narrower, industry-based coalitionsin later periods was unlikely.Expectations and ndingsare reported in Table 5. Sincewe havelittle data on wagesand pro ts for Swedenin the rst halfof the nineteenthcentury, it isdifcult to makeclear predictions. Testing the theory is also difcult given the absence of democratic institutions and parties. The Riksdag did allowfor representationof interests in this period, however, and it seems that the

115.Hall 1986.Indeed, in the 1960s and 1970s many trade associationsactually merged withthe governmentagencies created tosupervise them. Mytelka 1982. By the1970s, trade associationsin the footwear,watch, clock, and television industries were formulatingthe plans for those industries and even negotiateddirectly with foreign producers and governments to establishvoluntary restraints onimports. Milner1988, 198. 116.Hall 1986,169 – 70. 117.Safran 1985, 107– 18. 118.Gourevitch 1986, 186. 119.Mitterrand eventually af rmed hissupport for European integration in the early 1980s,even thoughseveral Socialistministers opposedit, and the Communists called forFrench withdrawal from the ECaltogether. 28 InternationalOrganization

TABLE 5. Anticipatedand observed outcomes in Sweden

Outcomes: Class- Factor basedparties and Period endowmentsMobility Prediction a associationsIndustry groups

1815–69 Abundant labor; Intermediate? Mixed? — Evidenceof some scarce landand grouppressures on capital Riksdag;craft guildsopposed liberalreforms

1870–1914 Abundant labor; High Class Ruralistsand Few groups scarce landand coalitions Conservatives activelylobbied capital supported on trade protection;Social Democrats championedfree trade

1919–39 Abundant High Class Parties adheredto Accommodation capital;scarce coalitions oldplatforms, LO between parties and laborand land b and SAF peakassociations supportedfree left littleroom for trade; “cow lobbying trade”between SocialDemocrats andAgrarians

1945–94 Abundant labor High Class DominantSocial Littleactivity; more andcapital; coalitions Democrats, lobbyingin 1980s scarce landc opposition parties,and peak associationsall heldto free-trade consensus

greatestsupport for theliberalizing reforms begunby Oscar Iinthe 1840s came from amixof specic agriculturaland business interests. In particular, timber and lumberinterests, producers of ironore and pig iron, and the commercial centers all ClassVersus IndustryCleavages 29 were strongsupporters of reform andespecially elimination of the protectionist Produktplakat. 120 Grain,meat, and dairy producers, and burghers in the tightly regulatedtextile and iron industries, were vocalopponents. 121 Oscar’s mostradical reforms, establishingfree tradein agricultural goods, were implementedby Grip- enstedtin the1850s and 1860s and helped to weakensupport for theold regime. In 1866the Riksdag was transformedinto a bicameralparliament with elected representatives,and organized political parties began to form. Inthe 1870s the lingeringdepression generated new protectionist demands among alargesection of the agricultural population, especially in thegrain-growingregions ofSvealandand northern Go ¨taland.The Liberal Themptander government, backed stronglyby urbanvoters and business interests, negotiated a newliberal treaty with Francein 1882, and the political con ict over trade quickly escalated. A protec- tionistleague, and a rivalAssociation Against a Tariff onFoodstuffs, formed, and in1887 two elections to thelower chamber of theRiksdag were foughton thetariff issue.122 Bostro¨m’s newRuralist government imposed high tariffs onagricultural products,and when the French treaty expired in 1892, raised tariffs again. 123 Oppositioncame not only from theLiberals but also from theSocial Democratic clubsand trade unions representing the still-disenfranchised working class. In 1889 theseelements founded the Social Democratic party, which took a rm standagainst protectionand turned the deepening class cleavage into a clearpartisan battle. 124 Whena coalitionof the Social Democrats and Liberals nallywon control of governmentin 1917—inthe wake of electoralreform— they immediately liberalized Swedishtrade policy. Thealliance between Social Democrats and Liberals broke apart in 1920 over the issueof tax reform andwas followedby a stringof short-lived minority governments.In 1929 and 1930, with a farm crisisgrowing, the coalition government of Conservativesand Agrarians attempted to passnew protectionist legislation but was defeatedby strongopposition from SocialDemocrats and urban Liberals. In 1932, inthe midst of the depression, the Social Democrats formed a newminority government,this time with support from theAgrarians. They outlined a programto combatunemployment and relieve agricultural distress, and passed tariff-cutting legislationwith the support of both Agrarians and Liberals. The 1936 election gavethe Social Democrats a majorityin the lower chamber, but they were assiduousin tending to the “ cowtrade” and allowed a rangeof specic tariffs and

120.See Rustow1955, 24; and Heckscher 1954,218, 224 – 25.The Produktplakat prohibitedany foreignvessel fromimporting to Sweden any goods other than those produced in its home country and raised dutiesby 40 – 50percent for imports and exports carried onforeign ships. 121.See Montgomery1939, 114; and Heckscher 1954,233. 122.Rustow 1955, 34. In the rst electionfree traders wona majority;in the second they were robbed ofvictory by anelectioneering blunder (in Stockholm, a strongholdof free-trade sentiment,protectionists discoveredan irregularity in the tax records of one of the candidates and succeeded inhaving all the free-trade representatives disqualied). Rustow 1955, 36. 123.Verney 1957, 108 –109. 124.Rustow 1955, 42. 30 InternationalOrganization subsidiesto aid farmers. 125 In1938, in an effort to be included in the bargaining, businessassociations met with labor and farming organizations and concluded the famousPact of Saltsjo¨baden.The broad accommodation between class interests— successfulwhere the French Popular Front had failed— included a commitmentto liberaltrade policy and left little room for industrygroups in the policymaking process. Inthe years after 1945 the dominant Social Democrats and the Conservative partiesall backed a liberalapproach to trade policy that emphasized the need for smoothadjustment to the demands of the international market, aided by vigorous retrainingand adjustment assistance policies. 126 Theparties and peak associations, includingthe Landsorganisationen and the Svenska Arbetsgivarforeningen, re- maineduni ed internally on thetrade issue, and on economicissues in general,and grouplobbying was severelylimited. 127 Toa largedegree the Social Democrats’ policyof wageequalization took the trade issue out of politics,since it meantthat thedifferential effects of tradeon wagesin particularsectors were minimized.This levelof “solidarity”was madefeasible by extensivemobility-enhancin gpolicies— thehallmark of Swedish policy in the postwar period. 128 Whenthe Social Demo- crats nallylost power in 1976, the new Center-Right government maintained its commitmentto open markets and continued to support adjustment assistance and retrainingprograms. Only in the 1980s were theresigns of change when the Landsorganisationenand Svenska Arbetsgivarforeningen began to face growing challengesby member groups. 129

Canadaand Australia InCanada, levels of inter-industrymobility have remained relatively low throughout mostof the period considered here. 130 Accordingto the theory, we thusexpect

125.Sainsbury 1980, 33. The 1936 party manifesto assured theAgrarians that “ theSwedish working class willpay the price necessary toguarantee workers in agriculture and small farmers atolerableliving standard.”Mabbett 1995, 87. Rogowski has attemptedto explain the alliance byreference onlyto trade politics,suggesting that labor in Swedenmight be considered a scarce factor at thistime (dueto “familial self-exploitation”among the peasantry) like land, and so was alignedwith farmers infavorof protection. Rogowski1989, 84 – 86.The problem with this interpretation is thatSwedish labor and the Social Democrats continuedto support open trade andonly made specic concessionsto farmers inorder to preserve thealliance. 126.See Jones1976, 22– 25; and Katzenstein 1985,65. 127.Sjoblom 1985, 24 –25,51. 128.Jones 1976, 39 –42.The seminal planwas devisedin 1951 by economistsGo ¨sta Rehnand Rudolf Meidner.Heclo andMadsen 1987, 49 – 50.After initialhesitation, even the protectionist-leaning textile workersagreed toretrainingand relocation bene ts as analternative to preserving jobs in theirdeclining industry.Milner 1989, 109. This, according to Rehn, was exactlythe plan’ s objective:“ toavoid protectiveand protectionist palliatives when changes in the world trade situationor othertrade conditions create difculties for various groups. ” Rehn1985, 1. 129.Weaver 1987,305. Labor unions in the export-oriented engineering industries grew increasingly discontentwith centralized wage bargaining.Similarly, SAF members pushedharder for more freedom tobargain with their workers independently with respect towages (see Pontussonand Swenson 1993). 130.For a more detaileddiscussion of these cases, see Hiscox1997 and forthcoming. ClassVersus IndustryCleavages 31

TABLE 6. Anticipatedand observed outcomes in Canada

Outcomes: Class- Factor basedparties and Period endowmentsMobility Prediction a associationsIndustry groups

1815–69 Abundant land; LowIndustry Toriesfavored high Highlyactive; scarce capital coalitions tariff andLiberals many groups and labor opposed,but both petitionedthe splitalong regional Assembly lines

1870–1914 Abundant land; LowIndustry Liberalsvery Highlyactive; scarce capital coalitions divided;Tories more groupspetitioned and labor united on House and protectionist lobbied NationalPolicy DominionBoard of Trade

1919–39 Abundant land Intermediate; MixedLiberals and Tories Littleevidence andcapital; rising supportedNational of group scarce labor Policy,but split by lobbying western agrarian movement

1945–94 Abundant land LowIndustry Bothmajor parties Groupsactive in andcapital; coalitions supportedGATT pushing for scarce labor b process,but divided special deals overCUSFTA and NAFTA

strongindustry cleavages in Canadian trade politics, with perhaps the only change comingin the interwar years when the wages data indicate that mobility rose to “intermediate”levels. The evidence, summarized in Table 6, tsreasonably well withthese expectations. DominatedbyMacDonal d’sToriesin the early nineteen thcentury, trade politicsin Canada was stronglyshaped by patronag eandgroup pressures . 131 Thechief supporte rs offree tradewere graingrowers andtimber producer s inthewestern province s,whereasfarmers intheeastern province saswellas the

131.See Coleman1988, 19; Forster 1986, 17– 18; and Ethier 1988, 224. 32 InternationalOrganization ironand textile industri eslobbiedfor protection.Industry and regional division s cutacross factor classes. 132 Thetariff becamemore of a partisanissue after Confederationin 1867, when the Liberals, drawing strong support from agrar- iansin thewest, advocat edtariff reductions.But the party was internallydivided overtrade and proved no match for theeastern-u rbanelectora lstrengthof the Tories,who pushed through the protecti onist“ nationalpolicy” in 1878. 133 Divisionsamongbusiness groups, workers, and farmers hamperedthe develop - mentof class-basedpeak associat ions,and industry groups continue dtoplay a veryactive role in policyma king. 134 Classcleavage sdid,as expected ,become morevisible in the 1920s and 1930s, when radical agrarian movement sinthe westernprovince schallengedthe protectio nistpolicy endorsed by the major parties;but a seriesof concessi onsby King’ s Liberalgovernme nthelped to checkthe con ict. 135 Inthe years after 1945, with the parties (and peak associations)relying on heteroge neouscombinat ionsof regional ,ethnic,and economicgroups for support,the policyma kingprocess was shapedmore by “ins versusouts” than by simple class cleavage s. 136 InAustralia the pattern looks very different. Levels of factor mobility rose precipitouslyfrom the1870s to the 1930s and remained relatively high in later decades.According to the theory, we expectAustralian trade politics to bemarked bya fairlyrobust class cleavage, pitting owners of abundant land against urban interests,since late in thenineteenth century. 137 Again,the evidence, summarized in Table7, suggests a reasonable t. After thecolonies became self-governing in the 1850s and 1860s, debates over tradepolicy were characterizedby ercelobbying by local industry groups in each legislature,with different sets of manufacturers and workers takingopposing

132.Palmer 1983,20. On the lobbying patterns, see Easterbrookand Aitken 1956, 291. Protectionist manufacturers formedthe Association for the Promotion of Canadian Industry in 1858, but others counteredby creating a Tariff Reform Associationin thesame year.Forster 1986, 35, 47. 133.On divisions within the parties, see Forster1986, 175; and Easterbrook and Aitken 1956, 393– 94. 134.On the dif culties faced bynascent labororganizations in these years, see Palmer 1983.On the CanadianManufacturers’ Association, see Coleman1988, 22. On lobbying, see Forster1986, 114; Coleman1988, 20; and McLean 1895,19. 135.The rst agrarianattack came fromthe Progressive Party in the1920s, to whichKing responded byreducing duties on farm machineryand sales taxon all farm inputs.McDiarmid 1946,264. The second attack came fromthe Cooperative Commonwealth Federation in the 1930s, in which farmers combined forces withradical laborgroups. King responded this time witha programof farm subsidiesand support forbilateral agreements withBritain and the United States. 136.This conclusion is Thorburn’s .Thorburn1985, 17, 338. On divisions over trade amongfarmers andamong member unionsin the Canadian Labor Congress, see Protheroe1980, 36. The Canadian ManufacturingAssociation refused to take anygeneral position on the trade issue. 137.Rogowski actually predicts that business joined farmers as advocatesof freer trade inAustralia beginningin the interwar periodwhen measures indicatethat the economy was capital abundant comparedto world averages. Giventhe extent of biasin Australian trade owstoward Britain and later theUnited States, for political and historical reasons, we mightquestion this. The economy was certainly capital scarce comparedwith its major trade partners. ClassVersus IndustryCleavages 33

TABLE 7. Anticipatedand observed outcomes in Australia

Outcomes: Class- Factor basedparties and Period endowmentsMobility Prediction a associations Industrygroups

1815–69 Abundant land; LowIndustry — Highlyactive; scarce capital coalitions many groups and labor testied before committees on trade policyand petitionedstate assemblies

1870–1914 Abundant land; High Class Protectionistsand Fewer groups scarce capital coalitions Free Traders fought activelylobbied and labor overtrade issue until trade commissions merger in1909; Laborprotectionist

1919–1939 Abundant land High Class Liberal-Country Littleevidence of andcapital; coalitions coalitionand Labor lobbyingon trade scarce labor b bothprotectionist

1945–1994 Abundant land High Class Coalitionand Labor, Majorgroups andcapital; coalitions alongwith AFB and lobbiedTariff scarce labor b,c ACTU,committed to Board for protection;some alterationsto rates Countryparty dissent in 1980s

aClass coalitionsare expectedto imply that class-based organizationsare internallyuni ed on trade andadopt coherent platforms while groups are inactive.Industry coalitions imply that class-based organizationsare internallydivided on trade andadopt ambiguous positions (see Table1). bHere Rogowski’s classication is problematic.The evidence on endowments employed by Ro- gowskicompares factor proportionsin each nationwith world averages. Giventhe overwhelming biasin Australia’ s dependenceon trade withBritain (for political and historical reasons) and,after 1945,on trade withthe United States, a strongcase can bemade forconsidering the economy to be scarce incapital relative toits main tradingpartners. Data fromlater years isconsistentwith this view.This leads ustopredict that business (and the organizations representing them) wouldsupport protection,as theanalysis here seems tocon rm. cUsing1966 data, Bowen, Leamer, andSveikauskas (1987) ndAustralia tobe veryscarce incapital—in contrast to Rogowski’s ndings—and in all typesof labor (except agricultural workers) and abundantin arable land. 34 InternationalOrganization positions.138 Butthe lines of cleavagewere redrawnaround the turn of thecentury. Urban“ protection”leagues battled with rural “ free trade”leagues in each colony duringthe 1890s and in the new federal Parliament after 1901, when they were transformedinto the Protection and Free Tradeparties. The Protectionists formed an uneasygoverning coalition with Labor after 1903, but militancy among unions and Labor’s growingelectoral success eventually split them. In 1909 Protectionists and Free Tradersformed an anti-Labor coalition, the Liberal party, that endorsed the prevailinghigh tariff andeffectively shelved the trade issue. The protectionist compromise—as unique, in its own way, as Sweden’ s free-tradecounterpart— remainedsolidly in placein the decades that followed, as both sides voiced uni ed supportfor existingpolicy. 139

Conclusions andImplications

The ndingshere have important implications for theanalysis of tradepolitics and, moregenerally, for economicpolicymaking. They suggest that the types of political coalitionsthat take shape in societyand organize to inuence economic policymak- inglargely depend on one basic feature of theeconomic environment that may vary overtime and across nations: the extent to which factors of productionare mobile betweenindustries. Although a numberof scholarshave discussed the possibility of relatingvariation in factor mobility to variation in coalitions, no systematicempir- icalexploration of the relationship has been attempted to date. 140 Theevidence reported here indicates that levels of factor mobility have varied considerablyhistorically and cross-nationally among several Western economies, in linewith different stages of industrialization and differences in regulation. The investigationof trade politics in each case reveals a strongcorrelation between generallevels of inter-industry factor mobility and coalition formation. Overall, classcoalitions appear stronger— that is, class-based parties and peak associations aremore uni ed on trade— when levels of mobility are higher. Industry coalitions appearstronger— that is, lobby groups take a moreactive role in policymaking— whenlevels of factor mobility are lower. The ndingsmay carry important implications for thelikely character of trade policies.When the trade issue becomes a moreinternally divisive force in major partiesand peak associations, party leaders will have an incentive to gravitate

138.See Serle 1971,31– 32; and Atkins 1958. When governments in Victoria and New SouthWales set upselect committees toinvestigate trade policyand the state oftheir economies in the 1860s, they were oodedwith petitions and witnesses lobbyingon both sides ofthe tariff issue.Patterson 1968, 12–14, 25. On divisions among labor, see Nairn1957, 435– 36. 139.See Cotter1967. In the postwar years, theLiberal-Country coalition also took the position that, as longas foreignbarriers toagricultural exports remained high,they were justied in maintaining high protectionfor domestic manufacturing and effectively opting out of GATT liberalizations(a position acceptable torural exporters and business interests dependenton protection). Not coincidentally, they introduceda generalprogram of subsidies aimed at farmers. Arndt1965. 140.See Magee 1980;and Alt et al.1996. ClassVersus IndustryCleavages 35 towardincoherent positions aimed at balancing competing demands from the strongestgroups on either side of the debate. Ambiguity in policy facilitates the compromisethat becomes essential for partyleaders faced with competing demands.This may describe developments in the United States and other Western economiesin recent years, where leaders have used an array of nontariffinstruments toundercut multilateral liberalization without actually abandoning the process. Thereare reasons to be cautious about the ndingshere and what we canmake ofthem. I havenot controlled for othervariables that might plausibly explain differencesin coalition patterns and in the behavior of partiesand groups. Variation inelectoral and policymaking institutions are likely to have effects. Political organizationsgeared to representingbroad types of coalitions are more likely when thefranchise is extended more widely among society, for instance,and parties may beexpectedto act more cohesively, in general,in parliamentary systems and under proportionalrepresentation than they do inpresidential systems and under plurality rule.141 Rogowskihas argued that whether proportional representation encourages politiciansto appealto broaderor moreparticularistic interests actually depends on howattached voters are to theparties (that is, how easily they can be “bought”). 142 DanielVerdier and James Alt and Michael Gilligan have argued that policymaking rulesthat allow more access and in uence for lobbygroups (say, during hearings by legislativecommittees) are less likely to encourage formation of broad class coalitions. 143 Certainlythese arguments warrant more empirical investigation, aimed speci - callyat making sense of trade politics. It is highly unlikely, however, that they can explainall the variation we seein cleavagesover trade policy. The broad urban-rural conict that de ned U.S. tradepolitics in the 1880s and 1890s, for instance, developedwithin the same institutional structure that allowed the infamouslobbying free-for-all overthe Smoot-Hawley bill in 1930. In Britain, intense Left-Right partisanshipon tradein the1920s gave way to internalbickering among groups and partyfactions at both ends of thespectrum by the 1960s, without a majorchange in institutions. 144 Electoraland policymaking rules undoubtedly have important effects ontrade politics. But the evidence presented here suggests that cleavages are

141.See Duverger1954; LaPalombara andWeiner 1966; Cox 1987; and Turner and Schneier 1970. Inthe fuller version of the analysis, I havegone some way towardcontrolling for these effects by measuringlevels ofparty cohesion in votes on trade legislationin each case relative togeneral party cohesionin all votesduring the same legislativesession. 142.Rogowski 1998. 143.See Verdier 1994;and Alt and Gilligan 1994. Verdier’ s claim ispartof a far more ambitious argumentthat attempts toendogenize policymaking institutions themselves byreference tothesalience anddivisiveness of the trade issue amongvoters. Though wonderfully provocative, Verdier’ s studydoes notattempt totest thisargument empirically and encounters some real problems.The argument treats voterpreferences overtrade policyas exogenous,for instance, ignoring their origins, and yet considers thepreferences of rms andunions to be endogenous to policymaking institutions. For an alternative argument(focusing on theorigins of theU.S. Reciprocal Trade Agreements Act of1934) about how trade policycoalitions can shapetrade policymakinginstitutions, see Hiscox1999. 144.For a detaileddiscussion of howseveral institutionalarguments fare inexplainingevidence from all sixof thenations discussed here, see Hiscox1997, chaps. 1, 8 andforthcoming. 36 InternationalOrganization powerfullyshaped by economicforces. The next step should be to specifyjust how cleavagesand institutions interact to produce patterns in trade politics. Thereare other reasons for proceedingwith caution. The theory is based on a modelof the economy that assumes competitive markets and no international movementof factors. Relaxing these assumptions creates a numberof complica- tions.We mayexpect, for instance,that as economies of scale become more importantin production, not only do broad class coalitions become less likely in tradepolitics, but divisions may also emerge between individual rms withinthe samesector. 145 Allowingthat factors of production can be more or less mobile internationallywould also require a signicant reformulation of thetheory. 146 Also, noallowancehas beenmade for variationin ownershipstructures in capital markets. Inparticular, deeper equity markets make it easier to trade ownership of capital assetsin different industries and for ownersof capitalto diversifytheir portfolio of investmentsacross industries. 147 Tothe extent that capitalists own diversi ed portfolios,they should be lessconcerned about individual industry returns and how theyare affected by trade and so less inclined to form industry-basedcoalitions in tradepolitics. 148 Finally,since factor mobility clearly can be affected by regulations, we must questionthe degree to which it is endogenous to politics. Very littlesystematic researchhas been done on thepolitical origins of restrictionson factormovements andadjustment assistance and other mobility-enhancin gpolicies. 149 Perhapsexist- ingcoalition patterns shape policies in ways that help determine future levels of

145.Individual rms may lobbyon their own account or form ad hoc coalitions with rms fromother industrieswith similar preferences. Thispattern seems more commonin recent years inthe United States. The1994 debates overthe Uruguay Round of GATT, for instance, witnessed the formation of the Coalitionof Service Industries,Intellectual Property Committee, andAlliance forGATT Now,all with diversememberships oflarge rms. 146.For a formal treatment ofthis issue, see Hiscox1998. Whether international factor mobility reinforces class orindustry cleavages overtrade turnsout to depend on the degree offactor mobility between industriesand whether factors locatedin different industries are differentiallymobile between nations. 147.Williamson’ s analysissuggests that the development of equity markets inthe twentieth century is actuallyrelated toincreasing capital specicity (indicated by thepro t data inFigure 1) .Whencapital is less mobilebetween uses,we shouldexpect greater reliance onequity nancingrather thanon borrowing,since lendersare more reluctantto investin more specic assets andcharge premiums forthe addedrisks. Williamson 1985, 307– 309. Meanwhile, as Mussahas pointedout, at lowerlevels ofcapital mobility,the negative correlation between returnsto capital inexport and import-competing industries providesan incentive for capital ownersto diversify ownership across industries.Mussa 1974. 148.This raises some fundamentalquestions about the distinction between ownersand managers and itspolitical implications. Managers act onlyas agentsfor the capital investedin each rm. Sincethey, andthe industry associations they form, make decisionsabout how much to spend on lobbying— and since theyalso comprise thedirect memberships ofbusiness peak associations— itis notclear thatwe needto greatly modify the anticipated effects ofvariation in mobility outlined in Table 1. The implicationsfor party behavior are perhapsless clear. Tothe extent that parties respondto group lobbying,the anticipated effects are unchanged;to the extent that they respond to preferences of capital-owningvoters (who may owndiversi ed portfolios), we shouldanticipate more unityon thetrade issue. 149.Burgoon and Hiscox 2000. ClassVersus IndustryCleavages 37 mobility—suggesting a sequenceof cause and effect between cleavages and mobilitythat would introduce a morecomplicated, dynamic component to the analysis.Bargaining between broad class coalitions in Sweden, for instance,does appearto have shaped the broad retraining and adjustment programs that kept inter-industrymobility levels high in the postwar Swedish economy. Or perhaps somethird force shapes both coalitions and factor mobility at the same time. This isVerdier’ s argumentabout the importance of electoral competition in determining theextent to which politicians try to appeal to broader rather than narrower coalitions(and hence the degree to which they favor mobility-enhancin gpolicies).150 Thedata speak quite clearly to thisendogeneity question. The evidence indicates thatlevels of factor mobility in Western economies have been powerfully affected byexogenouseconomic and technological changes associated with different stages ofindustrialization.That these changes in measuredlevels of mobilityappear to be associated,in anticipated fashion, with changes in coalition patterns in trade politics suggeststhat this line of inquiry is worth pursuing with new energy.

Appendix:Data Sources UnitedStates TheWeeks and Aldrich reports provide data on daily wage rates for workersin eighteenmanufacturing industries in 1860and thirteen in 1890. 151 Dailywage rates for twenty-oneskilled occupations associated with different industries are recorded asdecade averages for theperiod 1820 to 1880. 152 ClarenceLong also used Census ofManufactures 153 datato calculate annual earnings for workersin seventeen manufacturingindustries from 1860to 1890. I amendedhis original list slightly to extendthe series for fteenindustries from 1820to 1909, and constructed a similar seriesfor abroaderset of twenty industries. After theturn of thecentury, of course, evidenceis more readily available. 154 Hourlywage rates for manualworkers in the manufacturingindustries classi ed at the two-digit SIC levelare reported by the Departmentof Laborfrom 1947.In addition, the hourly rates for unskilledworkers between1920 and 1935 were recordedby the National Industrial Conference

150.Verdier 1995.Unfortunately, the vigorous mobility-enhancing policies in Sweden,employed by aSocialDemocratic governmentthat dominated postwar politics, run counter to Verdier’ s “competition” thesis. 151.See Weeks 1886;and Aldrich 1893. Data fromboth reports are reproducedin Long 1960. 152.The data are fromthe SixteenthAnnual Report of theBureau of Statisticsof Labor , Massachu- setts, 1885,and are reproducedin Mulhall 1899, 583. 153.Long 1960. 154.Speci cally, “ Liquors,malt” and “ Chewingtobacco” were cutfrom the list used by Long; boots andshoes, machinery, hardware, clothing,and printing were addedto make upthe longer list. The data for1820 are forPennsylvania only. For a thoroughdiscussion of theweaknesses oftheearly census data onwages, andthe comparative weaknesses oftheWeeks andAldrich reports, see Long1960, 3– 49. 38 InternationalOrganization

Board.155 Totalannual earnings for productionworkers arealso reported by industry bytheDepartment of Commercebeginning in 1899for fteencategories and from 1947for nineteencategories. 156 Dataon rates of returnto capital in different industries are even harder to come byfor earlyperiods than those on wages.For thelongest historical series (from 1820 to1919) I useddata from the Censusof Manufactures 157 tocalculate pro ts (value-addedminus wage costs) as apercentageof capitalinvested in manufacturing industries. 158 After 1919,the Census ceasedreporting data on capital invested in industries,but from 1947total man-hours per year are available for eachindustry, andI haveused pro t perman-hour as a proxyfor prot ratesthereafter. 159 Beginningin 1933,direct data are also available on corporationpro ts (as percent- agesof net worth and equity) by two-digit SIC industriesfrom theSecurities and ExchangeCommission. 160

Britain Dataon wagesof skilledworkers in thenineteenth century are drawn from Michael Mulhalland sources cited therein, and from Mitchell’s BritishHistorical Statis- tics.161 Dataon thewages for technicaland manual workers after 1915 are from the CentralStatistical Of ce, BritishLabour Statistics: Historical Abstract. Furtherdata aredrawn from theILO’ s Yearbookof Labour Statistics ,andthe UN’ s Industrial StatisticsYearbook .Dataon value-added are drawn from theUN’ s Industrial StatisticsYearbook ,whichprovides value-added data from 1953,and from Mitch- ell’s BritishHistorical Statistics ,whichreports census data from 1907.

France Dataon wagesof skilledworkers in thenineteenth century are drawn from Michael Mulhalland sources cited therein. 162 Dataon thewages of skilledworkers between 1915and 1935 are from theILO’ s Yearbookof LabourStatistics ;from 1915on the yearbookprovides hourly rates for workersin different industries. The series on manuallabor wages is from the Annuairestatistique de la France . The UN’s IndustrialStatistics Yearbook providesvalue-added data from 1958.

155.The data are reportedin Glasser 1940,36. 156.Department ofCommerce, HistoricalStatistics of theUnited States , and StatisticalAbstract of theUnited States . 157.U.S. Securities and Exchange Commission, CorporationPro ts, variousyears, andU.S. Department ofCommerce, StatisticalAbstract of theUnited States . 158.I usedthe same listsof fteen andtwenty manufacturing industries employed for the calculation ofannual earnings of workers described earlier. 159.The latter followsAlt et al.1999. 160.U.S. Securities and Exchange Commission, CorporationPro ts, andU.S. Department of Commerce, StatisticalAbstract of theUnited States . 161.See Mulhall1899; and Mitchell 1988. 162. Ibid. ClassVersus IndustryCleavages 39

Sweden Dataon the wages of male and female workers between1860 and 1930 are from Go¨staBagge. 163 Ihavealso drawn data on wages from theILO’ s Yearbook of LabourStatistics ,andthe UN’ s IndustrialStatistics Yearbook .DouglasHibbs and HakanLocking provide further evidence on industry wage variation. 164 Data on industrypro ts are from theUN’ s IndustrialStatistics Yearbook ,whichprovides value-addeddata from 1953.

Canada Datafor wagesin the nineteenth century are from Urquhart’s HistoricalStatistics of Canada.Furtherwage data are drawn from theILO’ s Yearbookof LabourStatistics and the UN’s IndustrialStatistics Yearbook .Dataon industry pro ts are from the UN’s IndustrialStatistics Yearbook, whichprovides value-added data from 1938, and from HistoricalStatistics of Canada ,whichprovides data from 1870.Data on corporationpro ts and assets are from StatisticsCanada, CorporationFinancial Statistics.

Australia Datafor wagesin the nineteenth century are drawn from theNSW Statistical Register.Dataon hourlyrates for workersare derived from theILO’ s Yearbook of Statistics.Dataon earnings are supplied from theUN’ s IndustrialStatistics and from theAustralian Bureau of Statistics, ManufacturingEstablishments . Dataon value-added are from theUN’ s IndustrialStatistics Yearbook and from the ABS’s ManufacturingEstablishments .Also,recent data on industry pro ts are derivedfrom theIndustry Assistance Commission’ s annualreports.

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