Osgood - The Breakdown of Industrial Opposition To Trade

The Breakdown of Industrial
Opposition to Trade
Firms, Product Variety, and
Reciprocal Liberalization
By Iain Osgood*
Introduction
T HE trade politics literature has long debated whether trade pits

competitive industries against uncompetitive industries or abun-
dant factors of production against scarce ones. This article examines
a third possibility—that industries may be internally divided because
only some firms benefit from trade liberalization. Following the lit-
erature on firm heterogeneity in export performance, three empirical
patterns that are inconsistent with either industry-centered or factor-
centered approaches to trade, or both, are documented here. Single
industries feature both support and opposition to reciprocal trade lib-
eralization. An even larger set of industries features support for trade
liberalization in both country partners. Most striking is that across a
broad array of trade agreements, strong public support—often backed
by lobbying efforts—emerges from import-competing industries. This
evidence makes clear the need for a new theory of trade politics with
the firm at its center.
Each of these outcomes is driven by the potential to export of large
firms in industries producing differentiated products. In these indus-
tries, firms monopolize particular product varieties because of consum-
ers’ taste for diversity in product features. This love of variety grants
producers a measure of independence in determining the price for their
product, and also generates intra-industry trade—where a country both
imports and exports varieties of the same product. Consequently, those
* Thanks to the anonymous reviewers for many valuable suggestions. Thanks also to William Clark,
Jeffry Frieden, Elhanan Helpman, Michael Hiscox, Andrew Kerner, James Morrow, Dustin Tingley,
and the participants at the University of Michigan’s Political Economy Workshop.
World Politics 69, no. 1 ( January 2017), 184–231
Copyright © 2016 Trustees of Princeton University
doi: 10.1017/S0043887116000174
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breakdown of industrial opposition to trade 185
firms that produce varieties at high cost face only greater competition
from abroad as a consequence of trade liberalization, while low-cost
firms expand rapidly into foreign markets in the wake of trade liber-
alization and naturally support globalization as it grows their bottom
line. This article documents a strong correlation between the surprising
patterns described above and product differentiation. The findings sug-
gest that firm heterogeneity, and not simply multinationalization or the
growth of global supply chains, has fundamentally altered trade politics.
The empirical tests in this article employ an original data set of asso-
ciation, firm, and industry attitudes toward fifteen US trade agreements,
presented here for the first time.1 The data on public position-taking
are complemented with data on lobbying for each of these agreements,
which show that firms in industries producing differentiated products
are much more likely to lobby on their own rather than through their
industry association. Because this lobbying was conducted on recipro-
cal trade agreements that primarily had the effect of lowering trade
barriers, and because the firms and associations that lobbied and took
public positions were overwhelmingly likely to support these agree-
ments, it seems unlikely that this firm-centric lobbying is evidence of
firms seeking particularistic forms of firm-specific trade protection.2 I
argue that these patterns are another manifestation of intra-industry
disagreements arising from firm heterogeneity in export ability.
The contributions of this article can be briefly summarized. One
strand of the literature on trade politics emphasizes that large firms
play an outsize role in trade politics.3 I theoretically systematize and
empirically examine the circumstances under which firm heterogeneity
has a decisive effect on patterns of trade politics, emphasizing the role
of product differentiation in activating heterogeneity in export perfor-
mance as a key analytic factor.4 Although the main prediction of the
1
These agreements include: the US Free Trade Agreements with Jordan, Singapore, Chile, Aus-
tralia, Morocco, Bahrain, Oman, South Korea, and the Dominican Republic-Central American Free
Trade Agreement states; the US Trade Promotion Agreements with Peru, Colombia, and Panama; the
failed Free Trade Agreement of the Americas; and two agreements governing the extension of Perma-
nent Normal Trade Relations to China and Russia. Plouffe 2012 uses some of the same agreements to
show that larger firms are more likely to lobby in support of liberalization.
2
Bombardini and Trebbi 2012.
3
Schattschneider 1935; Milner 1988a; Milner 1988b.
4
For recent empirical work that emphasizes the importance of firms in trade politics, see Plouffe
2012, Kim 2013, Osgood 2016b, Madeira 2014, and Osgood et al. 2016. Plouffe 2012, Plouffe 2016,
and Osgood et al. 2016, find that larger, export-competitive firms support trade liberalization; Kim
2013 and Madeira 2014 argue that these firms are more likely to lobby on their own, especially where
products are differentiated or where intra-industry trade is high. For more theoretically oriented treat-
ments of these same issues, see Osgood 2016a; Chang and Willmann 2006; Abel-Koch 2010; Plouffe
2012; Kim 2012.
186 w o r l d p o li t i c s
Ricardo-Viner approach—that trade should divide competitive and

uncompetitive industries—ought to remain valid in the 10 percent or so
of US industries producing undifferentiated commodities, alternative
models of preferences emphasizing within-industry differences should
apply in industries where products are differentiated. I examine a va-
riety of alternative explanations and find that firm heterogeneity and
product differentiation consistently have the most significant impact.
What are these effects? Indifference and opposition to trade among
manufacturers are structurally undermined by pro-globalization firms
that dominate public position-taking and lobbying on trade policy.5
Public expressions of support for trade, especially by firms striking out
on their own independent of trade associations, emerge from industries
at a comparative disadvantage relative to their trade partners. Implicit
coalitions materialize across international borders—particularly in in-
dustries where the United States is relatively uncompetitive. Disagree-
ments over trade among firms in the same industry occasionally spill
out into public view, but the general pattern I document is strong sup-
port for liberalization by a select group of winners that spans the com-
petitiveness spectrum and dominates the politicking on trade, whether
public or private. This research therefore answers a nagging question for
watchers of recent US trade agreements: Why has America’s business
community (almost) uniformly supported trade liberalization in an era
of low interindustry factor mobility, when trade liberalization ought to
pit industries against each other? Product differentiation has activated
the independent interests of the largest firms in the United States; their
size has permitted them to break free of the allegiances of industry to
defend firm-specific policy goals on their own terms.
This article also contributes to two related literatures on international
trade. A rich literature examines the political determinants of trade
agreement formation and trade agreement features.6 My work adds to
that literature by focusing on the interaction of differentiation and firm
heterogeneity, and by developing and testing original industry-level
implications of this approach on a new data set of public positions.7
It also contributes to the study of collective action and trade policy,
5
Opposition to trade among nonproducers—especially certain unions, progressive organizations,
and segments of the public—remains an important force, albeit one weakened by the lack of effective
producer-led opposition outside a few key industries. Populist opposition to trade, as witnessed in
the 2016 presidential primaries and in previous presidential elections, is therefore the main political
weight behind opposition to trade.
6
See Mansfield, Milner, and Rosendorff 2002; Mansfield and Reinhardt 2003; Kucik 2012; Dür,
Baccini, and Elsig 2014.
7
See Milner 1997; Chase 2003; and especially Manger 2012, which emphasize the key roles of
economically motivated special interests and product differentiation.
arguing that the concentration of the benefits of trade in the hands of

the largest exporters provides a structural advantage to their political
efforts—their preferences are more intense, their resources are more ex-
tensive, and their influence is more entrenched.8 Support for liberaliza-
tion intersects with political advantage, biasing American trade politics
toward liberalization despite the toll of deindustrialization.9
Gaps in the Standard Approaches

The Ricardo-Viner model, which argues that competitive industries
should support trade and uncompetitive industries should oppose it,
provides the foundation for the study of preferences over trade, collec-
tive action around trade, and endogenous trade policy.10 The Stolper-
Samuelson theorem, which emphasizes cleavages between relatively
abundant and scarce factors, is also regularly employed toward these
same ends, though is perhaps less dominant. The trade literature of-
fers an elegant explanation for how to reconcile these competing ap-
proaches by considering changes in interindustry factor mobility over
time,11 so why pursue alternatives based on intra-industry trade or firm
heterogeneity in export performance?
In this section, I make two arguments. First, intra-industry trade
and firm heterogeneity have been demonstrated to be key features of
the vast majority of industries.12 But the standard trade model excludes
these elements despite their important implications for the distribu-
tional effects of trade. While the predictions of the standard model may
remain entirely valid in industries that produce commodities, they will
not hold in industries that produce differentiated products and where
firms differ in their ability to export, that is, in a majority of indus-
tries. The study of the trade politics in any given industry must be built
upon a clear understanding of the trade patterns that characterize that
industry.
Second, an examination of the expressed preferences of firms and
8
Busch and Reinhardt 2000; Drope and Hansen 2009.
9
Autor, Dorn, and Hanson 2013; Pierce and Schott 2016.
10
See, respectively, Frieden 1991; Beaulieu 2002a; Beaulieu 2002b; Schattschneider 1935; Bauer,
de Sola Pool, and Dexter 1963; Magee 1994; Grossman and Helpman 1994; Grossman and Helpman
1995. For use of the Stolper-Samuelson theorem, see Mayer 1984; Rogowski 2000; Dutt and Mitra
2002; Milner and Kubota 2005.
11
Hiscox 2001.
12
See, for example, Grubel and Lloyd 1971; Grubel and Lloyd 1975; Brander 1981; Brülhart
2009; Helpman and Krugman 1985; Bernard, Jensen, and Lawrence 1995; Pavcnik 2002; Bernard et
al. 2003; Bernard and Jensen 2004; Bernard et al. 2007; Mayer and Ottaviano 2008; Bernard, Jensen,
and Schott 2009; Freund and Pierola 2012.
trade associations over recent US trade agreements provides ample evi-

dence of firm and association behavior that is inconsistent with either
industry- or factor-centered approaches to trade attitudes, or both.
These data are presented in Table 1. To understand their significance,
recall that the main prediction of the Ricardo-Viner model is that firms
in export-competing industries will support trade liberalization while
firms in import-competing industries will oppose it.13 This model also
predicts that if one country’s industry is opposed to bilateral liberaliza-
tion, then the same industry in its partner country should be in favor of
trade liberalization. Finally, the Ricardo-Viner model does not predict
and cannot explain the existence of disagreements over trade liberaliza-
tion within a single industry.
These claims are contradicted by the data in Table 1, which presents
data on 403 agricultural, mining, and, manufacturing industries across
all US free trade agreements from 1995 to 2012. Across the complete
set of cases, one-third of import-competing industries contain clear evi-
dence of support for the agreement with the trade partner(s) with whom
they have a trade deficit.14 Even more surprisingly, among the subset
of import-competing industries where any public position is taken on
an agreement, that position is overwhelmingly likely to be support, not
opposition. A typical example is the US farm machinery industry. In
recent years, its import/export ratio with South Korea has varied from
2:1 to 5:1. Despite this, five farm machinery producing firms in the
United States supported the US-Korea Free Trade Agreement (korus),
while the Farm Equipment Manufacturers Association took no public
position. Similar stories hold in many import-competing industries—
including autos, plastics, and metal products—where US firms and as-
sociations publicly supported korus despite large trade deficits.
Two other outcomes in these data are also inconsistent with both
the Ricardo-Viner and Stolper-Samuelson views of trade politics. In
a significant number of industries across the fifteen agreements, trade
liberalization was supported by firms or associations in both trade part-
ners at the same time. For example, the Winemakers’ Federation of
13
Despite the usual issues surrounding the endogeneity of trade flows due to trade policy, export-
competing industries are typically identified as having greater export sales than import competition;
net-importing industries are assumed to be import-competing. Of course, import penetration might
also be evidence of global production networks. I return to this point shortly.
14
Support is defined as three or more firms or one trade association publicly expressing support for
the agreement within a particular six-digit naics industry. In Table 1, import-competing industries are
defined as those that import more than they export for the trade partner(s) in each agreement. Opposi-
tion is defined as two or more firms or at least one association expressing opposition. Industries where
a position is taken feature support, opposition, or both support and opposition, as defined.
Table 1
Position-Taking and Lobbying Patterns Inconsistent with
Standard Approachesa
All Agreements korus/ausfta Only
All Position- All Position-
Public Positions of Industries Industries Takers Industries Takers
Support in import-competing
industries 39.6 94.9 51.9 70.4
Support in both countries 5.0 12.2 26.2 38.6
Intra-industry divisions 2.2 5.6 9.3 16.3
All Agreements korus/ausfta Only

Patterns of Lobbying Activity All Position- All Position-
by Industries Industries Takers Industries Takers
Industries in which firms, but not
associations, take positions 6.7 37.3 6.5 22.6
Industries in which firms, but
not associations, lobby 8.0 37.1 13.0 36.1
Industries in which firms
and associations lobby 5.8 11.7 12.0 19.0
a
Percentages of US industries (six-digit North American Industry Classification System [naics])
with evidence of behavioral patterns inconsistent with standard approaches to trade preferences. Four
samples are considered: all agriculture, mining, and manufacturing industries across fifteen agree-
ments; the same set excluding industries where no position was taken by any group of firms or associa-
tions (or where no lobbying occurred); and the same two groups across only the korus and ausfta
agreements, which generated especially rich interest-group activity.
Australia and the Australian-based Hardy Wine Company both sup-

ported the Australia-US Free Trade Agreement (ausfta), as did the
Wine Institute (a US trade association of California wine producers),
and three US wine producers. In the cases of ausfta and korus, this
simultaneous bilateral support occurred in more than one-quarter of all
industries in which a public position was taken.
The data also provide evidence of intra-industry divisions over trade
agreements, although these events are generally less common. Most of
the observed disagreements took place over korus, but significant in-
stances of public disagreement are recorded in the data for nine of the
fifteen agreements. For example, the Motor and Equipment Manufac-
turers Association and the Automotive Aftermarket Industry Associa-
tion both publicly supported korus, even as ten US manufacturers of
motor vehicle engine parts opposed the agreement. Such divisions were
more overt in the steel industry. As the head of the Steel Manufacturers
Association noted when discussing korus, “Within the steel industry

there are differing views.”15
The lower section of Table 1 reports findings that reveal additional
holes in industry-centered accounts of trade politics. First, in many
industries, firms take public positions while their trade associations do
not. Second, some firms regularly engage in lobbying without matching
efforts by their trade associations. And third, in many industries firms
and trade associations both lobby. Each of these observations is hard
to square with a model in which all firms in an industry share iden-
tical preferences over trade. They point instead toward a new model
that focuses on firms’ preferences and the potential for intra-industry
disagreements over whether to support or oppose liberalization. Of
course, a logical alternative explanation is that some industries are less
organized and thus lobbying efforts fall on the shoulders of constituent
firms, so this evidence on lobbying is suggestive but not dispositive.
Collectively, the evidence presented in Table 1 suggests that new
approaches to trade politics are needed. While this article argues that
intra-industry trade and firm heterogeneity are the crucial additions to
our models of trade politics, there are other explanations for the patterns
described in the table. Moreover, a focus on intra-industry trade and firm
heterogeneity is not appropriate in industries producing commodity-
type products where one-way trade flows are the rule. Product differen-
tiation, the leading explanation of intra-industry trade, provides the key
scope condition for the relevance of the theory presented here.
In the following section, I discuss the implications of product differ-
entiation and firm heterogeneity in detail, and then describe how their
effects might be distinguished from other plausible explanations for
the patterns described above, such as multinationalization, the foreign
sourcing of inputs, and variation in the extent of political organization.16
Theory
The most important recent development in the study of the economics
of trade is the focus on firms and the ways that globalization takes mar-
ket share from the smallest while increasing the profits of the largest.17
The fact that some firms gain and some firms lose from trade liberal-
ization—even in the same industry—provides a prima facie, compel-
ling explanation for each of the patterns documented in Table 1. This
15
Guzzo 2011.
16
Milner 1988a; Milner 1988b; Gawande and Bandyopadhyay 2000; Busch and Reinhardt 2000.
17
Helpman 2011, chap. 5.
section develops this idea, emphasizing the importance of product dif-

ferentiation, which uncouples the fates of firms in the same industry
and so activates firm productivity as the key determinant of producers’
attitudes toward trade. The motivations that translate private prefer-
ences into public expressions are then described along with several em-
pirical implications.
Explanatory Factors: Firm Heterogeneity and
Differentiated Products
The possibility of intra-industry redistribution of profits in the wake of
trade liberalization, and thus of intra-industry disagreement over trade,
relies on four crucial factors. First, and most obviously, firms in the
same industry must differ in their export engagement. Under the addi-
tional conditions described below, firms that are capable of selling their
products abroad have the possibility of gaining from greater trade; firms
that are not will face only greater competition from increased trade. To
illustrate, only about 18 percent of US manufacturing firms ever export,
and the vast majority of export sales are concentrated among an even
smaller percentage of firms. Among all US firms that export, 1 percent
controls over 80 percent of US export sales.18 This heterogeneity has
two immediate implications: firms in the same industry may disagree
about whether to support or oppose trade liberalization, and they may
differ in the intensity of their preferences.
Second, the product must be differentiated; consumers should have
a desire for varieties of what are essentially the same good. Product
differentiation plays an important role in generating intra-industry di-
visions over trade liberalization because it gives rise to intra-industry
trade, in which countries both import and export goods in the same
product class. For example, wine and watches are differentiated prod-
ucts that have significant intra-industry trade; bananas and oil are not,
and intra-industry trade of these goods is quite limited. Intra-industry
trade means that bilateral trade liberalization has two competing ef-
fects: it leads to greater competition in the home market and increases
opportunities for export. Combined with firm heterogeneity, these dual
effects mean that the least productive firms face only losses from greater
trade, while the most productive ones can gain on net, due to increased
sales in the foreign market.19
Bernard et al. 2007; Bernard, Jensen, and Schott 2009.
18
Product differentiation and intra-industry trade are also given analytical primacy in Manger
19
2012 and Manger 2014, which focus on product differentiation as a driver of vertical intra-industry
trade (in which firms specialize in different qualities) and of foreign direct investment (as firms global-
The third condition for intra-industry divisions over trade, which

emerges from the formal analysis of intra-industry divisions, is that
neither country partner is overwhelmingly competitive in the produc-
tion of a particular product.20 If that balance is off, then no firms in
the country at a strong comparative disadvantage in that product will
support liberalization, and all firms in the country at a comparative
advantage will support, or at least not oppose, liberalization.
In the model used to derive these results, comparative advantage is
driven by technological differences and market size. The advantages
of superior technology are obvious, but it’s important to highlight two
crucial effects of a large market because of the size asymmetries be-
tween the trade partners examined in this article. A relatively large mar-
ket spurs higher rates of firm entry, which leads to a more productive
and more diverse distribution of firms. Such “home-market effects” are
a common feature of models of international trade with product dif-
ferentiation. A larger home market also blunts the impact of trade com-
petition for nonexporting firms producing differentiated products by
ensuring greater heterogeneity among consumers, and thus the preser-
vation of niche varieties.21 For these reasons, opposition to trade is likely
to be both less prevalent and less intense in larger markets, all else equal.
The fourth condition for intra-industry divisions over liberalization
is that both country partners must reduce barriers to trade in that in-
dustry. Unilateral liberalization only increases competition in the home
market, providing no new opportunities to export. Figure 1 illustrates
this idea. In the figure, a foreign and domestic industry producing a
differentiated product are engaged in mutual competition, with one
country partner more competitive than the other. But because the prod-
uct is differentiated, even in the less competitive country there are firms
that export. Despite the asymmetry in competitiveness, both countries
have exporting and nonexporting firms. As a corollary, all firms in both
countries also face import competition.
ize their production networks to produce cheaper or labor-intensive varieties in low-wage countries).
Chase 2003 and Milner 1997 argue that product differentiation is linked to firm-level economies of
scale, thus the demand for limited liberalization to expand market size via preferential trade agree-
ments (ptas). This article differs from Chase and Milner’s work, focusing instead on the ways that
differentiation and firm heterogeneity interact to generate intra-industry disagreements.
20
For a formal treatment of this claim, see Osgood 2016a.
21
On home market effects, see Krugman 1980; Head, Mayer, and Ries 2002. See Melitz and Ot-
taviano 2008 and Alesina, Spolare, and Wacziarg 2000 for a review of the procompetitive effects of size
and for further discussion of size and heterogeneity.
3 Support
2 Support
in CD
in both
industries
Exporters
countries
Exporters
Pro-trade
1 cutoff
Intra-
industry Intra-
Pro-trade 1
divisions industry
cutoff
divisions
Nonexporters
Nonexporters
Opposition
2
in both
countries Opposition
3 in CA
countries
Comparative Disadvantage Country Comparative Advantage Country
Figure 1
Schematic Representation of the Testable Hypothesesa
a
Each rectangle represents the set of firms producing a differentiated product in one of two coun-
tries. Firms with higher productivity are shown at the top of each rectangle. The country at a com-
parative disadvantage in that product is on the left. The firms at the top are likely to be exporters, and
therefore the only ones that can benefit from trade liberalization. Because of intra-industry trade in
the differentiated product, firms in both countries face greater import competition upon liberalization.
Public Position-Taking on Preferential Trade Agreements

This article examines public expressions of firm and trade association
support for or opposition to fifteen US trade agreements, including all
US free-trade agreements since nafta and two bilateral agreements as-
sociated with the extension of Permanent Normal Trade Relations (pntr)
to China and Russia. These agreements have attracted significant at-
tention from political scientists, and understanding the determinants of
preferences over them is crucial for understanding contemporary trade
politics.22 In an era of stalled and failing World Trade Organization ne-
gotiations, preferential trade agreements (ptas) represent an important
venue for political contestation over trade policy in the United States
22
Much of the literature on the strategic logic of ptas and on features of ptas is discussed below.
Significant research has also examined domestic institutional determinants of pta formation (Mans-
field, Milner, and Rosendorff 2002; Mansfield and Milner 2012; Mansfield, Milner, and Pevehouse
2007); ptas designed to exploit fdi flows (Manger 2012; Manger 2005; Büthe and Milner 2008; Med-
vedev 2012); agreements as a tool to alter domestic political alignments (Davis 2004; Bailey, Goldstein,
and Weingast 1997); the competitive logic of ptas (Manger, Pickup, and Snijders 2012); and interac-
tions between ptas and other international institutions (Mansfield and Reinhardt 2003; Kono 2007;
Kono 2012; Ravenhill 2010). There is also a growing literature on the complex effects of these agree-
ments, for example, Rickard and Kono 2014; Mansfield and Reinhardt 2008.
and abroad, and one that attracts significant attention from policymak-
ers, international organizations, and special interest groups.
At a practical level, these agreements fit an important scope condi-
tion of the theory—that liberalization is reciprocal—and provide rich
variation on the key outcome and explanatory variables. Trade liber-
alization occurs not only via reductions in tariffs (many of which are
already low or zero), but also through locking in existing concessions
to reduce uncertainty, reductions in nontariff barriers, rules on customs
and trade facilitation, reductions in technical barriers, limits on sanitary
and phytosanitary measures, government procurement provisions, and
so on. The agreements therefore provide a fertile and theoretically ap-
propriate environment for examining the effect of industrial features on
preferences over trade liberalization.
Because preferences are not the same thing as public statements of
support or opposition, it is worth reflecting on the process that leads
firms and associations to publicly comment on trade agreements. This
position-taking follows the twin logics of “outside lobbying”—to com-
municate the extent of interest-group support to politicians averse to
upsetting key constituencies and to generate greater political support for
preferred policy outcomes by raising the profile of the issue.23 Firms and
trade associations are well-positioned to be active and effective on ques-
tions of trade policy. In contrast to ordinary voters and special interest
ngos, the stakes are high for these groups and their preferences can be
precisely stated at the level of the firm, if not the entire industry.24 Poli-
ticians use this clear and well-considered information, supplemented
by private, “inside” lobbying to eliminate uncertainty when channeling
rewards to preferred firm and industry constituents—a challenge given
the multifarious nature of preferences over trade.25 Firms are also ar-
guably less subject to the complex mix of economic and noneconomic
factors that drive preferences for globalization among mass publics.26
Given these motivations, this article assumes that public expressions
23
Kollman 1998.
24
Dür and De Bièvre 2007; Lohmann 1998.
25
De Bièvre and Dür 2005. For politicians, channeling policy rewards to these constituencies might
be driven by concerns about upsetting politically influential interest groups, campaign contributions,
or simply effective representation of industry. Each of these motives points in the direction of such
constituencies wishing to accurately inform politicians of their attitudes across all channels of com-
munication.
26
For more on this rich literature, see Sabet 2014; Mansfield and Mutz 2009; Hainmueller and
Hiscox 2006; Rho and Tomz 2015. There is not a large volume of research on noneconomic drivers
of firms’ preferences over trade or other policy issues (though see Milner and Tingley 2011). But an
extensive literature on firm and industry preferences suggests that economic factors are fundamental in
driving trade preferences among these actors. See, for example, Plouffe 2012; Beaulieu 2002a; Beaulieu
and Magee 2004; Hiscox 2001; Magee 1994; Milner 1988a; Milner 1988b.
of support and opposition to trade agreements largely reveal the genu-

ine, underlying preferences of firms and associations. This assumption
particularly holds for expressions of public support because these ex-
pressions are widespread, benefit from multiple channels of communi-
cation, are often documented across multiple sources for the same firms
and associations, and are mostly unambiguous in their language. This is
not to say that there is no self-censoring associated with these expres-
sions; it is doubtful that all opinions see the light of day. Indeed, public
statements of opposition to trade agreements are rare, as shown below
in Table 2. Note that this lack provides no evidence for the Ricardo-
Viner approach to trade politics, which predicts significant opposition
to trade in some industries, and so must implicate some other driver of
preferences or determinant of their public expression.
One explanation for this lack of public opposition among produc-
ers does not involve self-censoring of genuine interests, and is rather
entirely rational. It could be that firms or industries are uninterested in
expressing any opposition to trade liberalization because the stakes are
simply not high enough. In industries with a highly skewed distribution
of firm sizes, the benefits of trade liberalization may be concentrated
in the hands of a small number of firms27 while the costs are diffused
across the entire array of producers. These costs are likely to be mod-
est when opening up trade with smaller countries, which usually have
smaller firms and less variegated industries. For US firms especially, the
negative effects of increased openness to foreign competition may be
blunted by the rich demand for variety in the world’s largest economy.
Other explanations for the relative lack of opposition to trade liberal-
ization do implicate self-censoring and alternative theories. Firms may
be unwilling to express opposition to trade liberalization if antitrade
discourse is denigrated in the US business community or if antitrade
firms feel that their complaints will not be impactful. Opponents of
trade may be unable to express opposition if smaller firms are less or-
ganized and less informed, if larger firms dominate the main organi-
zational and lobbying platforms, or if protrade organizations are better
organized or funded. The protrade attitudes of larger firms documented
in several recent studies fit nicely with an emphasis on their superior
political resources, connections, and influence, to help explain the pro-
trade bias of public expressions of support for trade.28
It could be that there are other plausible alternative models for the
27
Dür and De Bièvre 2007; Wilson 1974; Osgood et al. 2016.
28
See, for example, Plouffe 2012 and Osgood et al. 2016.
lack of public opposition that contradict the core propositions devel-

oped here. Trade politics may be essentially a Stolper-Samuelson story
of capital versus labor or may be driven by other commercial impera-
tives in trade agreements, such as protection of foreign investment or
intellectual property. Of these explanations, the Stolper-Samuelson ac-
count can be considered unlikely a priori: factor mobility is low in the
present era, not high.29
At this point, the lack of public opposition to trade liberalization is
flagged as an empirical contribution of this article, and is discussed be-
low. This lack also presents a challenge: to find observable implications
of the distributive consequences described above that are robust to any
self-censoring that might be associated with public expressions of oppo-
sition to trade liberalization. Before pursuing this, I address some con-
cerns about the use of preferential trade agreements to test the theory.
If public opposition to ptas among firms and trade associations is
relatively limited, then why don’t these agreements sail through the US
Congress? One answer is that it is likely that some opposition is not
publicly expressed. Final passage can also be slowed by the objections
of particular industries, as when the beef and auto industries demanded
renegotiation of korus to improve market access. Since Democrats
constitute the majority of those voting no on trade agreements, a key
part of the answer likely lies with their constituencies. All major US
trade agreements have seen significant criticism and opposition from
labor unions, environmental groups, associations representing small
farms, human rights groups, and other progressive civil society organi-
zations. While these groups may have defeated prospective agreements
and altered agreement terms, they have not successfully defeated final
passage of any negotiated agreement, and the undermining of industrial
opposition—opposition from industries that would be united in oppos-
ing trade liberalization in a world of homogeneous products—helps to
explain why.
Do preferential trade agreements actually increase trade? An ear-
lier empirical literature generated mixed results when examining trade
flows. But the most recent work addressing several longstanding meth-
odological concerns has found large and positive effects of trade agree-
ments on trade flows, even if there remain noneconomic motivations
for such agreements.30 This stance is corroborated in research that ex-
plores the links between the economic features of trade partners and
Hiscox 2002.
29
On the earlier literature, see Baier and Bergstrand 2007; Gray and Slapin 2012 for references
30
and discussion. On the recent literature, see Baier and Bergstrand 2009; Egger 2004; Baier and
both the decision to conclude such agreements and the parameters of

the agreements themselves.31 Nonetheless, some of the agreements
concluded by the United States are with trade partners that have little
economic heft, and were likely driven by strategic imperatives to ratify
longstanding alliances or to achieve other noneconomic policy goals.
One focus of the empirical analysis in this article is to test the theory
across all agreements and then to examine the results across only those
agreements in which the economic effects are likely to have been most
salient.
Relatedly, a significant literature in political science examines the ar-
ray of design choices made by policymakers when entering into ptas.32
Such variation could defeat tests of my theory if, for example, provisions
for agreement flexibility or a lack of judicial institutionalization defeat
the liberalizing purpose of a pta.33 This variation could also threaten the
inferences drawn from the data if the salience of other nontrade-related
treaty dimensions are systematically correlated with product differenti-
ation and the puzzling preference outcomes described above. Note that
much of the expanded trade agenda is fundamentally about liberalizing
trade, and so remains consonant with the theoretical framework I de-
scribe. I address the aspects that are not consonant, such as investment
provisions, below.
Empirical Implications for Public Position-Taking
In this section I develop an explanation for the puzzling patterns de-
scribed above, and provide the main empirical implications of a focus
on firm heterogeneity. These implications are all tailored to this par-
ticular case, where a larger economy (the United States) liberalizes trade
with a smaller country or group of countries. First, I consider the case
of intra-industry divisions. Although relatively rare, these public divi-
sions occur regularly across the data. For example, the US textile indus-
try had public disagreements among trade associations and firms over
the Dominican Republic-Central American Free Trade Agreement
(cafta-dr) and pntr for China. As another example, the aircraft parts
industry disagreed over korus with nine firms opposing the agreement
and four firms supporting it; the Aerospace Industries Association and
Bergstrand 2007; Mansfield and Reinhardt 2008; Egger et al. 2011; Chauffour and Maur 2011; Cali-
endo and Parro 2015. On the noneconomic motivations for concluding such agreements see Gowa
and Mansfield 1993; Mansfield and Bronson 1997; Gowa and Kim 2005; Mansfield and Milner 2012.
31
Manger 2014; Manger 2005.
32
Baccini, Dür, and Elsig 2015; Dür, Baccini, and Elsig 2014; Kucik 2012.
33
Jo and Namgung 2012; Johns 2014; Kucik and Reinhardt 2008.
the Modification and Replacement Parts Association supported the

agreement, too.
—Prediction 1: Industries producing differentiated products are more
likely to have both supporters and opponents of bilateral liberalization.
These divisions are more likely where the United States is not at an over-
whelming comparative advantage.
These divisions arise straightforwardly from the model’s setup. For

industries producing a differentiated product, both countries are export-
competitive because consumers demand both foreign and domestic va-
rieties. But only some firms are capable of profitably exporting because
of the extra costs associated with tackling the export market. Because
all nonexporters face greater competition from trade liberalization, they
are likely opponents of trade. Their more competitive compatriots,
however, may be able to benefit from greater trade. In such cases, the
industry does not agree about the merits of trade liberalization.
This pattern of intra-industry redistribution and the divisions it gives
rise to will hold as long as one country isn’t overwhelmingly uncompeti-
tive in the production of a particular good. In that case, it’s more plau-
sible that support for liberalization will be unchallenged in the more
competitive country, even if that support is concentrated in the upper
reaches of the productivity distribution. Opposition will also be unchal-
lenged (or perhaps nonexistent if there is no industry to speak of ) in the
uncompetitive country. The trade agreements examined here present
a special case because one of the trade partners, the United States, is
significantly larger and more diverse than the others. Owing to the US
economy’s large size, which is a source of comparative advantage due
to the home-market effect described above as well as a buffer against
commercial annihilation by foreign competition, it seems likely that
intra-industry divisions will be concentrated in less-competitive US in-
dustries.34 In contrast, it is highly unlikely that these divisions will be
seen in the most competitive US industries.
While these divisions occur in a noticeable subset of the data de-
scribed above, they are hardly as omnipresent as the widespread exis-
tence of either product differentiation or intra-industry trade suggests
they might be. (Divisions are observed in less than 2 percent of all in-
dustries across all cases, and in just over 8 percent of the korus/ausfta
cases. And the cause is quite clear: the lack of public opposition, outside
34
This is not to argue that the US industries cannot, or have not, faced severe and even fatal com-
petition from trade partners abroad, but rather that the US market’s large size and the diversity of its
consumers provides an extra layer of protection for producers of niche varieties, all else equal.
of certain agreements, as discussed above. The next set of predictions

permits us to examine the impact of product differentiation on trade
politics even where no publicly expressed opposition occurred.
I first return to instances of bilateral support for trade liberalization,
which constitute an implicit international coalition in favor of trade
liberalization in the same industry.
—Prediction 2: Industries producing differentiated products are more
likely to have supporters of trade liberalization in both countries. This
should be especially likely in industries where the United States is not
overwhelmingly competitive.
The justification for this prediction is the same as for Prediction 1. As

an example, the petrochemical industry in both the United States and in
Bahrain supported the fta between the two countries; likewise for the
semiconductor industry in the United States and Korea and Australia.
Another empirical implication of the theory, which again acknowl-
edges that support is generally easier to observe than opposition, relies on
the fact that even comparative disadvantage industries might have sup-
porters of trade liberalization as long as their product is differentiated.
—Prediction 3: Industries at a comparative disadvantage are more likely
to feature supporters of a proposed trade liberalization if their products
are differentiated.
Instances of this last outcome abound, for example, the US adhesives

and printing ink industries supported liberalization with Chile despite
significant trade deficits. The United States nonetheless exports tens of
millions of dollars’ worth of these goods to Chile.
Each of these three predictions is represented schematically in Figure
1. Note again the crucial role of two analytic factors in generating the
results. First, the product must be differentiated so that there is a pos-
sibility of trade flowing in both directions in the same industry. Second,
firms must differ in their ability to access export markets. Although the
firm heterogeneity factor may seem the most important of these, prod-
uct differentiation is in fact the key explanation. For firms producing a
homogeneous commodity, whether or not they export is irrelevant as
long as the price effects of trade liberalization are felt. In contrast, for
firms producing differentiated products, benefiting from trade requires
expanding into the export market. Competition will increase at home
whether the industry is net-exporting or net-importing—only exports
can compensate for sales lost in the home market.
Lobbying on Free Trade Agreements

To explore the impact of firm heterogeneity on trade politics, lobbying
activities are a natural complement to the outcomes described above.
I consider two facets of lobbying—public and private. As discussed
above, outside lobbying occurs where special-interest groups take pub-
lic positions, for example, through the construction of coalitions or
coordinated public testimony.35 Rather than examine the substantive
content of those messages, I consider the patterns of position-taking
between firms and associations. While the dominant approaches to
trade politics suggest that producers within an industry ought to speak
with a single voice on trade, in many industries firms alone take public
positions, while trade associations remain silent. Across all industries
where either a trade association or at least three firms took a public po-
sition, firms took positions without any trade association activity what-
soever in more than 38 percent of industries. Inside lobbying, in which
firms and associations work with a lobbyist to privately lobby on trade
issues, shows a similar level of fragmentation. In around 37 percent of
industries where any lobbying takes place, firms’ lobbying efforts are
not matched by any effort from the trade association. In a further 11.7
percent of industries, both firms and associations lobby.
This pattern—firms lobbying independent of their industry trade
association—is a natural fit for a model of trade politics focused on the
firm. And firm heterogeneity and product differentiation are the crucial
analytic factors that explain when firms will be motivated to defend
their own interests separate from the rest of their industry.
—Prediction 4: Industries that produce differentiated products should
be more likely to have firms lobby independent of their trade associa-
tions. Industries producing homogeneous products should be more likely
to have associations lobby without accompanying efforts by firms.
How does this depart from the literature on trade and lobbying?
Earlier empirical accounts focus on inside lobbying. The data presented
here permit a head-to-head comparison of inside and outside strategies,
which have several key similarities documented here for the first time.
This article departs more profoundly on the theoretical side and the
interpretation of evidence.36 The literature argues that firms producing
differentiated products seek out product-specific protection, and lobby
as firms rather than via their association.37 The prediction presented
35
This distinction comes from Kollman 1998.
36
In this, it matches the approach taken in Madeira 2014.
37
Bombardini and Trebbi 2012.
here suggests a similar conclusion, but the context (reciprocal liber-

alization) points to an alternative premise. Free trade agreements are
unlikely sites for intensive lobbying on new firm-specific protection.
The coverage of these agreements is mostly comprehensive, albeit with
some significant exceptions. The large firms that publicly support and
lobby on these agreements hardly fit the profile of globalization losers
clinging to firm-specific protection. It is more plausible that they are
strong and active supporters of trade liberalization in industries that
don’t always reach unanimity on whether to publicly support trade
liberalization.
Alternative Explanations
multinationals and foreign production
Provisions governing foreign investment are an important component
of preferential trade agreements.38 It is helpful to distinguish between
horizontal and vertical foreign direct investment (fdi) when consid-
ering foreign investment as an alternative explanation to the patterns
described above.
Horizontal fdi occurs when foreign affiliates are founded or pur-
chased primarily to serve the foreign markets in which production takes
place. Some of the conditions that determine horizontal fdi are very
similar to those that predict intra-industry divisions over trade based
on export performance, for example, proprietary technology, variation
in firm competitiveness, and product differentiation.39 This similarity
raises the question of how to interpret a correlation between intra-
industry divisions and product differentiation.
Are intra-industry divisions likely when only some firms participate
in horizontal fdi? Considering competition in the domestic market and
the foreign market, in turn, suggests that the answer is no. By defini-
tion, firms engaged in horizontal fdi are not exporting back to their
home market, so this form of fdi creates no additional competition
in the home market. However, domestic-based firms that export may
clash with multinationals because the former wish to gain access to the
foreign market, and the latter aim to restrict it. These clashes require
a relatively implausible set of conditions whereby some firms are pro-
ductive enough to export, despite large trade costs, but insufficiently
productive to invest abroad, while other firms are highly productive
and motivated to invest abroad as the most efficient way to access the
foreign market.
38
Manger 2009; Büthe and Milner 2008; Baccini and Dür 2015.
39
Caves 2000; Helpman et al. 2004.
Vertical fdi seems a more likely arena for intra-industry clashes be-
cause the foreign production is aimed directly at export back to the
home market. The economic literature on vertical fdi focuses on loca-
tional advantages associated with foreign production and transaction
costs associated with outsourcing of differentiated (that is, firm-specific)
inputs.40 But the industries likely to feature these divisions are not the
same as those where divisions arise because of heterogeneity in export
performance. The links between product differentiation in final goods
and vertical fdi are not strong theoretically or in reality, as many agri-
culture, mining, and basic manufacturing firms have historically played
a significant role in vertical fdi.
Thus, the theoretical basis for the findings in Table 1 is either not
strong (in the case of horizontal fdi) or has different empirical impli-
cations (as in the case of vertical fdi). This is not to say that multina-
tionalization does not play an important role in firms’ attitudes toward
trade agreements, but rather that neither vertical nor horizontal mul-
tinationalization seems to be driving the correlation between product
differentiation and the findings described here. Nonetheless, because
multinational activity plays a significant role in public position-taking
in trade politics, I employ a control in all regression models to account
for the impact of fdi.
imported inputs and downstream exports
Another explanation for intra-industry divisions over trade liberal-

ization relies on the presumption that only some firms are capable of
importing inputs from abroad. It could be that industries that import
significant amounts of inputs from a particular country are more likely
to be divided over liberalization with that country. To test this idea, I
employ a control for reliance on imported inputs. Firms may also dif-
fer in their ability to supply downstream exporters located in the home
market. If larger export-competitive firms contract primarily with larger
domestic producers, then the divisions of the downstream industry may
be recreated, by proxy, in the supplying, upstream industry. I therefore
include a regression adjustment for the quantity of sales accounted for
by downstream exports in all models.
conflating different industries and the level of aggregation
If industries are defined in overly broad terms, fundamentally different

industries may be conflated leading to an overestimate of the number of
40
Helpman 1984; Grossman and Helpman 2002; Antras 2003.
industries that are divided over trade. For example, a domestic producer
of auto parts might oppose trade liberalization from which an auto
manufacturer would benefit. Or, if industry categories are too coarse,
industries producing fundamentally different products that are not sub-
stitutes for one another may disagree over trade simply because one
industry is more competitive than the other. To address this concern,
the empirical section uses six-digit North American Industry Classifi-
cation System (naics) industries, which is a relatively fine-grained level
of aggregation.41 Final goods are unlikely to be mixed with intermediate
inputs at this level, and it seems acceptable for attributing differences in
export performance to firm-specific attributes rather than differences in
technology or in the relative use of factors of production. I also include
a control for industry size in all models.
other policy issues in agreements
Divisions within industries over trade agreements may also arise when
nontrade-related policy issues are included in agreements that would
affect firms differently. For example, the US-based Generic Pharma-
ceutical Association opposed korus in part because it felt that the intel-
lectual property provisions included in the agreement were too stringent
and that government procurement rules in Korea discriminated against
makers of generics. But it is hard to systematically theorize about a
residual category such as this, other than to say that it is unlikely to be
correlated with product differentiation and that many of the examples of
internally divided industries do not appear to have a clear set of “other”
issues.
Cases, Data, and Methods

This article presents a new data set of publicly expressed positions
on trade agreements by US firms and trade associations in the agri-
culture, mining, and manufacturing sectors. The agreements include
twelve free trade agreements currently in force, one failed agreement
(the Free Trade Agreement of the Americas), and two bilateral trade
agreements associated with the extension of pntr to China in 2000 and
Russia in 2012. The public statements of foreign trade partner firms
41
Three-digit naics codes disaggregate sectors into broad categories, for example, Transportation
Equipment (naics 336). Four-digit naics codes break these up further, e.g., Motor Vehicles (naics
3361), Motor Vehicle Parts (naics 3363), and Aerospace Products (naics 3364). Six-digit codes, the
most commonly used level of disaggregation, arguably correspond best to the self-descriptions of
firms, e.g., Motor Vehicle Engines and Engine Parts (naics 336310) and Motor Vehicle Electrical
Equipment (naics 336320).
and associations are added to the data where possible although this was
only systematically achievable for the korus and ausfta agreements.
My analysis of foreign firms’ preferences therefore concentrates on this
subset of data.
A variety of sources were used to code firm and association positions
on each agreement. The greatest number of codings comes from ad hoc
coalitions, such as the US-Korea fta Business Coalition or the Latin
America Trade Coalition, which formed to support the US-Colombia
and US-Panama Trade Promotion Agreements (tpas). The second
largest source for codings was congressional testimony. Coalition and
congressional activity was generally combined on the Panama and Co-
lombia tpas and on the ftas with Bahrain, Morocco, and Oman, so
each of these clusters is treated as a single case. The remaining sources
include submissions to the US Trade Representative, congressional and
US International Trade Commission reports, letters to Congress or the
executive branch, national media and trade publication reports, and
statements released by individual firms or associations.
Table 2 provides summary statistics on all codings. For each agree-
ment (or agreement cluster), I report the number of supporting firms
and associations. The modal agreement has no (or very few) publicly
available expressions of opposition from firms and associations. All
codings are matched to particular sources that are fully described in
documents available from the author. Many of the codings have mul-
tiple sources and can be traced to separate sources entirely different in
nature. This redundancy is an important source of strength in the data.
The number of actors expressing opinions varies considerably across
agreements, apparently reflecting the size and significance of the trade
partner.
Table 2 also presents data on inside lobbying by US firms and as-
sociations. The raw data on lobbying come from the Center for Re-
sponsive Politics at OpenSecrets.org, and are available under Lobbying
Disclosure Act rules.42 I include lobbying of all agencies in the sample
and any instance where a firm or association mentioned an intention to
lobby on a specific trade agreement. For example, the vf Corporation
(an apparel and footwear company) mentioned cafta in multiple lob-
bying reports, as did the American Apparel and Footwear Association.
I also match lobbying data to the data on position-taking. Among firms
and associations that both took a public position and lobbied, the posi-
tion was overwhelmingly likely to be in support. A clear majority of
42
See Center for Responsive Politics 2014.
lobbying trade associations took a public position, while only a minority

of firms that lobbied publicly did so.
The expressed positions of firms and trade associations are the un-
derlying phenomenon described above, but the hypotheses articulated
here are about industries. Taking the six-digit naics industry for each
agreement as the unit of analysis, I map firms and associations into
these industries to answer the question: Did the industry show sig-
nificant evidence of support for, or opposition to, the fta? I coded the
industries of all firms and associations. Most firms and associations map
into multiple six-digit naics industries, therefore a single association
position might generate multiple industry-level codings.
Industries are coded from among four orientations: oppose, divided,
support, and no position. If an industry had even one association tak-
ing a position, then the industry is coded in that manner, even if other
associations took no position. If multiple associations conflict in their
positions, then the industry is coded as divided. An industry is also
coded as divided if an association was explicitly neutral and publicly
reported disagreement among its firms (such cases were quite rare).
Codings based on association positions are supplemented with codings
based on firm position-taking. Three supporting firms are treated as
the equivalent of a single supporting association. To accommodate the
relatively scarce domestic opposition and foreign position-taking, two
opposing domestic firms and one supporting or opposing foreign firm
are treated as equivalent to an association.
Proxying Product Differentiation and
Comparative Advantage
A coding of industries’ products as exchange-traded, reference-priced,
and differentiated goods is employed as the primary proxy for prod-
uct differentiation.43 Exchange-traded products are sometimes referred
to as commodities; their prices are primarily determined on organized
commodities trading markets such as the Chicago Mercantile Ex-
change. Soybeans, coffee, crude oil, and copper are all exchange-traded
commodities, for example, and all are classified as homogeneous indus-
tries for this project. Reference-priced goods represent an intermediate
case. While these goods are insufficiently fungible to be traded on an
exchange, where the traded goods must be virtually identical, they are
sufficiently standardized to be priced in trade publications. Examples
of such goods are tree nuts, construction sand, rope and cordage, plastic
43
This coding comes from Rauch 1999.
Table 2
Position-Taking and Lobbying of Firms and Associations across Trade Agreements
Data on Public Position-Taking
Associations Firms
Agreement Year Support Oppose Sources Unique Support Oppose Sources Unique
Trade agreements in force,

with foreign coding
KORUS (US) 2011 170 44 1.92 49 177 128 1.18 41
KORUS (ROK) 32 10 1.28 19 64 0 1.46 17
AUSFTA (US) 2004 46 15 1.27 14 135 0 1.10 7
AUSFTA (AUS) 28 4 1.61 33 25 0 1.69 23
All other trade agreements
in force
Jordan 2001 5 1 1.00 2 7 0 1.00 4
Singapore 2004 17 2 1.37 6 79 0 1.36 7
Chile 2004 32 6 1.28 6 90 0 1.00 5
CAFTA 2005 69 8 1.97 26 184 0 1.18 7

Bah/Mor/Oman 2006 16 3 1.32 8 44 0 1.11 7
Peru 2007 46 1 1.44 9 36 0 1.05 5
Col/Pan 2011 121 1 1.80 43 269 0 1.12 16
Other trade policy issues
China PNTR 1999 90 1 2.04 17 268 1 1.63 16
Russia PNTR 2012 25 0 1.00 1 91 0 1.02 5
Failed trade agreement
FTAA — 22 0 1.00 1 24 0 1.00 4
Data on Lobbying Activity
Lobbying Associations Lobbying Firms
Agreement Year Total Support Oppose No Pos. Total Support Oppose No Pos.
Trade agreements in force

Jordan 2001 2 0 0 2 1 0 0 1
AUSFTA 2004 8 4 1 3 22 15 0 7
Singapore 2004 2 0 0 2 7 4 0 3
Chile 2004 1 0 0 1 7 7 0 0
CAFTA 2005 26 15 2 9 67 22 0 45
Bah/Mor/Oman 2006 18 2 0 16 31 14 0 17
Peru 2007 28 15 0 13 58 12 0 46
Col/Pan 2011 59 40 1 18 132 56 0 76
KORUS 2011 74 59 4 11 150 63 5 82
Other trade policy issues
China PNTR 1999 1 1 0 0 10 7 0 3
Russia PNTR 2012 17 8 0 9 55 36 0 19
Failed trade agreement

FTAA — 6 2 0 4 5 1 0 4
a
Counts of US associations and firms by position on fifteen ftas or other trade agreements. The counts are supplemented with information on the average number
of sources per coding and on the number of unique source documents used. Data on position-taking by Australian and Korean firms and associations are also presented.
bags, and storage batteries. Clearly each of these products has a signifi-
cant element of variety, but is also not so unique that generic varieties
cannot be assigned a standard price. The residual category comprises
goods that are neither exchange-traded nor reference-priced, and are
referred to as differentiated goods. These goods are so variegated that
no single market price can be provided. Examples include wine, men’s
apparel, hand tools, mining machinery, light bulbs, and automobiles.
This proxy for the extent of differentiation appears valid both con-
ceptually and on its face. On the conceptual side, the measure captures
the critical theoretical distinction between homogeneous goods and
differentiated goods: homogeneous goods share a common wholesale
price determined on commodities exchanges or markets. This single
price then links the fates of firms producing in the same country. In
contrast, firms producing differentiated products have no common
price. Goods priced in reference publications lie somewhere between
these two extremes. As for face validity, the measure has been shown to
correlate with lower absolute price elasticities and with higher mark-
ups, both indicators of the ability of firms to differentiate products.44
Another way to think about this is that varieties of differentiated goods
are highly imperfect substitutes—creating a rationale for intra-industry
trade in varieties—while exchange-traded goods are, of necessity, nearly
perfect substitutes.
The original coding of industries into the three categories described
above is available for four-digit Standard International Trade Classifi-
cation (sitc) Revision 2 industries. This measure was concorded into
six-digit naics industries. Where there are disagreements, the modal
sitc coding is used, and some industries were recoded by hand to better
reflect the extent of differentiation. All codings are provided in Appen-
dix A of the supplementary material.45 To preserve the original struc-
ture of the coding, the variable is treated as a factor with three distinct
levels, although the effects of differentiation are expected to increase or-
dinally at each level. As a robustness check, I employ estimated import
elasticities of substitution, a common alternative proxy for the extent of
product differentiation.46 The Spearman correlation of the elasticity-
based measure and an ordinal version of the exchange-based measure
of differentiation is .234.
The trade politics literature primarily relies on proxies of competi-
tiveness or comparative advantage that use unadjusted data on trade
44
Broda and Weinstein 2006; Feenstra and Hanson 2004.
45
Osgood 2016c.
46
Broda and Weinstein 2006.
flows.47 Most commonly, an industry is presumed to be at a comparative

advantage if its net exports relative to some trade partner are positive.
Measures of revealed comparative advantage or import penetration also
use unadjusted trade data. Two imperfections with this approach are es-
pecially noteworthy. First, politically determined barriers to trade mean
that trade flows are endogenous to underlying competitiveness. Second,
holding the underlying cost structure of producers fixed, industries pro-
ducing differentiated products are likely to have higher intra-industry
trade flows.
This article nonetheless uses relative exports between the United
States and its trade partner(s) for a particular deal as the primary proxy
for comparative advantage and revealed comparative advantage as a sec-
ondary measure.48 To partially ameliorate some of the problems identi-
fied above (and to deal with industries with zero imports or exports,
which skew the data), these measures are discretized into five-point
scales based on their quintile in the complete distribution across all
trade agreements. This does not resolve measurement issues that push
observed competitiveness into different quintiles, but there are several
benefits to using these existing measures. They are easily understood,
transparently constructed, and consistent with much of the existing lit-
erature. Model-based alternatives are highly dependent on the model
chosen and do not always recover plausible estimates of underlying
competitiveness. Proxies based on factor intensities or prices require us
to believe in models of trade that fundamentally do not explain inter-
national trade flows.
Other Key Covariates
Data on fdi by the United States at the country level are only publicly
available at a relatively high level of aggregation, usually the two- or
three-digit naics code. However, data on worldwide fdi by American
businesses are available at the four-digit naics level. I assume that US
fdi in the agreement countries is distributed similarly to US fdi world-
wide within three-digit industries to construct a four-digit naics mea-
sure of potential fdi in each market. The measure is at the four-digit
level (indexed by j ), but employs data at the two-digit level (indexed by
i where i ∈ j ).
47
See, for example, Buckley, Pass, and Prescott 1988; Beaulieu 2002b; Scheve and Slaughter 2001;
Magee, Davidson, and Matusz 2005.
48
See Balassa 1965. A country’s revealed comparative advantage in some product is the total value
of its exports of that product as a proportion of all of its exports, divided by the world’s exports of that
product as a proportion of all world exports. The measure used here divides the United States’ revealed
comparative advantage in some product by its trade agreement partner’s.
DIAUS
j
FDI potentialj = DIAi US,Partner
. .
Sj DIAUS
j
Each of these figures is taken from the 2009 US Direct Investment

Abroad Tables produced by the Bureau of Economic Analysis in Sep-
tember 2012.49 This variable is referred to as fdi potential.
Because fdi is the leading alternative explanation for the patterns
described in this article, it is important to demonstrate the robustness of
the core findings to alternative proxies for fdi. Two alternatives are con-
sidered in robustness checks. First, I examine US imports from related
parties.50 In the sample of trade agreements employed here, the Spear-
man correlation between the fdi potential proxy and the related party
imports measure is .442. Second, I examine a decomposition of inter-
national trade flows into interindustry trade; quality-driven, or vertical,
intra-industry trade; and variety-driven, or horizontal, intra-industry
trade.51 Vertical intra-industry trade flows are especially important in
developed-developing country dyads, and are often indicative of global
production strategies by multinationals.52 This measure is constructed
using six-digit Harmonized System trade data concorded to naics in-
dustries, and is therefore the percentage of trade (in each naics in-
dustry) that is primarily vertical intra-industry trade.53 The Spearman
correlations of the vertical intra-industry trade measure with fdi poten-
tial and related-party imports are .107 and .230, respectively.
To capture the extent of US reliance on imported inputs, I use Bu-
reau of Economic Analysis Input-Output tables from the 1997 Eco-
nomic Census. The measure captures for each US industry an estimated
value of all inputs that are accounted for by foreign imports from a
particular trade partner. This variable is called imported inputs. A similar
procedure using US export data is used to calculate the total value of
an industry’s production that is exported in downstream products to a
49
See Table 8.1, U.S. Direct Investment Position Abroad on a Historical-Cost Basis, 2009. At
http://www.bea.gov/international/di1usdbal.htm, accessed May 2, 2014.
50
For other uses of this data to measure intrafirm trade and vertical fdi in political science, see
Jensen, Quinn, and Weymouth 2014; Baccini, Dür, and Elsig 2015. For purposes of imports, related
parties are defined as anyone holding 5 percent or more of voting stock or shares. But the related-party
trade data also includes imports by foreign firms with affiliates in the United States, and thus reflects
more than just fdi undertaken by US firms abroad.
51
This decomposition is developed in Fontagné and Freudenberg 1997.
52
Manger 2012; Manger 2005.
53
The data for this effort comes from Gaulier and Zignago 2010. I follow the specific parameters
for the decomposition employed in Manger 2014.
particular country. This variable is called downstream exports. Industry

size is included in all models using the total receipts of the industry
from the 2007 Economic Census. This variable is called sales.
A number of additional controls relating to the collective action
problem are introduced in the supplementary material to probe the ro-
bustness of the main results. These variables are mainly important as
potential alternative explanations for lobbying outcomes, and are not
fully observed across all industries. For these reasons, they are relegated
to the supplementary material, although the main findings are quite ro-
bust to their introduction. First, two measures of association resources
are introduced: the total budget of all associations representing an in-
dustry and the total number of associations representing a particular in-
dustry. These data come from the Gale-Cengage Associations Unlimited
database.54 Second, the number of firms (or farms) is controlled for as
an alternative dimension of industry size. Third, the four- and twenty-
firm concentration ratios are added; they represent the proportion of
sales in an industry accounted for by the largest four or twenty firms
in that industry. These measures of industrial concentration are not
available for the agricultural and mining industries, but a method for
estimating them that uses “Farms by Concentration of Market Value
of Agricultural Products Sold,” from the 2007 Agricultural Census,
is available for agricultural industries.55 No plausible method exists to
measure these ratios among mining industries, so I have omitted them
from the robustness checks.
Statistical Models and Robustness Checks
The statistical models examined below are introduced with the results.
The most parsimonious specifications are employed where possible,
conditioning only on linear terms for each variable, with a few excep-
tions described therein. The focus is generally on product differentiation
and the extent of comparative advantage—the two primary explanatory
variables—along with controls for the leading alternative explanations
for the outcomes seen here, fdi and multinationalization, sourcing of
inputs from abroad, indirect exports via downstream industries, and a
measure of industry size. Each model is considered for the case of all
agreements and the case of only the korus and ausfta agreements be-
cause intra-industry divisions and bilateral support for agreements were
54
Available at http://www.cengage.com/search/productOverview.do?N=197&Ntk=P_EPI&Ntt=
21738325056595353621191298011124168880&Ntx=mode%2Bmatchallpartial.
55
Osgood 2016c.
most prevalent (and the data on foreign positions are systematic) in the
korus and ausfta cases.56
The general empirical strategy is to focus on correlations within the
data predicted by the theory, checking for their robustness in all models
by conditioning on likely alternative explanations. The extent of prod-
uct differentiation and the competitiveness of the industry are treated
as exogenous determinants of industry attitudes, subject to the caveats
surrounding the measurement of competitiveness described above. It
does not seem plausible to consider the alternative explanations, such as
fdi or industry size, as confounding factors. It may be that these alter-
native explanations are downstream consequences of competitiveness
or differentiation that mediate between these factors and the outcomes
of interest. All models therefore condition on these variables to check
that the effect of product differentiation or competitiveness is not op-
erating via the proposed alternatives.57
The following robustness checks are available in the supplementary
material. First, to confirm that the results are not being driven by the
choice of proxies for product differentiation and comparative advan-
tage, robustness checks that use import elasticities of substitution and
revealed comparative advantage are examined. The main results are con-
firmed, except when using the elasticity measure among the complete
sample of agreements for the support outcome. Second, the main find-
ings are robust to the inclusion of additional controls for associational
resources, industry size, concentration ratios, and vertical intra-industry
trade, and to the use of related-party imports instead of the fdi potential
variable. Third, to ensure that the main findings are not being driven by
unrelated differences between manufacturers and the agriculture sector,
the robustness of the main results is demonstrated among manufactur-
ers only. Fourth, all the main models are reestimated in two additional
subsamples: all ftas in force (excluding the China and Russia pntr
votes and the failed ftaa agreement), and among the agreements that
seem least likely to have been driven primarily by noneconomic mo-
tives—the Chile fta, ausfta, cafta, the Peru tpa, the Colombia and
Panama ftas, and korus. Last, to address dependence among the units
caused by firms and associations crossing multiple industries, a series of
56
For these two outcomes only, a dummy variable for the korus agreement is included in each
model. All the comparative statics for these two outcomes should therefore be interpreted as if the
korus agreement is under consideration. Because intra-industry divisions and bilateral support are
rare outside of these agreements, the comparative statics suggest small effects for other agreements,
as would be expected.
57
For a discussion of the limitations of this approach in generalized linear models, see Glynn 2012.
random intercept models that replicate the main results are included in
the supplementary material. Intercepts are employed at both the three-
and four-digit naics levels.
Results
This article began by presenting several patterns in preferences and
lobbying over US free trade agreements that do not fit the standard
approaches to coalitional boundaries over trade politics. While these
outcomes are explicable in a framework that emphasizes firm hetero-
geneity, there are of course other compelling explanations. This section
therefore concentrates on two questions. First, are these surprising out-
comes more likely to occur in industries producing differentiated prod-
ucts, as a focus on firm heterogeneity and intra-industry trade would
predict? A strong association of this kind is inconsistent with likely
alternatives such as intra-industry variation in vertical fdi or sourcing
of inputs. Second, does this association hold when controlling for likely
alternative explanations?
The results show a consistently positive link between product dif-
ferentiation and preference-based outcomes, such as support for liber-
alization in net-importing industries and intra-industry disagreements
over trade liberalization. Examining the implications of firm hetero-
geneity for lobbying behavior shows that product differentiation also
predicts large increases in the likelihood that firms lobby on their own
for preferred trade policies.
Support for Trade Liberalization
As shown in Table 1, 39 percent of all net-importing industries showed
significant expressions of support for US ftas from 1995 to 2012. Even
more surprising, 94 percent of the net-importing industries that had
any significant public position-taking expressed only support for the
agreements. Public support is therefore the overwhelmingly likely out-
come for net-importing industries when evaluating trade agreements
if any public statement occurs. I argue that this unexpected outcome is
driven primarily by industries producing differentiated products.
Table 3 reports results from a logistic regression model that uses in-
dustry support as an outcome.58 The model is given by:
58
That is, support was expressed by at least one association or at least three firms. There may also
have been expressions of opposition, and these divided cases are examined below.
Pr(Support| ⋅) = InvLogit(b0 + b1CA + 2–3

Diff
+ 4–5CA × Diff + ′x).
Support, CA, and Diff refer to the measures of industrial support, com-
parative advantage, and product differentiation described above (recall
that the measure of differentiation is a trichotomous factor and so, af-
ter excluding a baseline category, requires two coefficients). In Table
3, import-competing, balanced trade, and export-competing industries
refer to 1, 3, and 5, respectively, on the five-point proxy for comparative
advantage. For the models included in Table 3, the additional covariates
are the measures of fdi potential, imported inputs, downstream exports, and
total industry sales (all logged). Instead of regression coefficients, I report
predicted changes in the percentage chance that an industry supports a
trade agreement. Changes in the identified variables are described in the
table’s note; all other variables are held at their median (or modal) value.
The model results clearly demonstrate that public support for trade
among firms and associations operates in fundamentally different ways
depending on the extent of product differentiation. When products are
homogeneous commodities, increasing export competitiveness from the
lowest to the highest level increases the percentage chance an industry
expresses support for a trade agreement by nearly 29 points. This effect
is even greater in the korus/ausfta sample, which received especially
high rates of public comment by firms and associations, exactly as the
Ricardo-Viner model would predict.
In sharp contrast, increases in relative exports in differentiated prod-
uct industries have mostly negligible effects on the likelihood of sup-
port for trade agreements. In other words, industry competitiveness is
only weakly correlated, if at all, with the probability of public support
for trade liberalization in differentiated product industries. Figure 2
further clarifies the very strong impact of product differentiation on
patterns of support for trade.
Examining the impact of changes in product differentiation on the
likelihood of support for liberalization clarifies the ways in which prod-
uct differentiation fundamentally alters trade politics. Import-compet-
ing industries producing differentiated products are much more likely
to have supporters of trade liberalization than industries producing ho-
mogeneous products. The effect of moving from a homogeneous to a
fully differentiated product in a net-importing industry increases the
percentage chance that an industry has support for an agreement by
19.3 points in the full sample, and by 25.9 points among the korus and
ausfta agreements. Product differentiation therefore generates support
Table 3
Modeling Support for US Trade Agreements, 1995–2012a
Support for Agreement
All kor/aus
Effect of Differentiation Conditional on Net-Exports
Imp. competing × Homogeneous → Mod. differentiated 10.41** 15.96
× Homogeneous → Mod. differentiated 19.32*** 25.89**
Balanced trade × Homogeneous → Mod. differentiated –2.48 –10.98
× Homogeneous → Mod. differentiated 1.56 –14.35**
Exp. competing × Homogeneous → Mod. differentiated –18.15*** –27.66***
× Homogeneous → Mod. differentiated –18.74*** –44.15***
Effect of Relative Exports Conditional on Differentiation

Homogeneous × Import → Export competing 28.87*** 56.64***
Mod. differen. × Import → Export competing 0.21 12.91
Differentiated × Import → Export competing –9.16*** –13.38
Other covariates
FDI potential 8.63*** –0.76
Imported inputs 8.46*** 6.44**
Downstream exports 0.72 0.71
Sales 9.86*** 16.22***
Sample size 4836 806
LRT p-value .000*** .000***
***p < 0.01, **p < 0.05, *p < 0.10
a
All estimates are first differences from a logistic regression; changes in continuous variables are
from the median to the 90th percentile except relative exports, which is from the 10th percentile to
the median and the median to the 90th percentile. Remaining variables are held at their median or,
for factors, mode. Likelihood ratio test considers models with and without the interaction between
comparative advantage and differentiation.
for trade liberalization in industries that otherwise would not support

free trade—industries that are at a comparative disadvantage.
These results suggest that the Ricardo-Viner model remains appo-
site among those industries producing commodity-type products, but
is quite unsupported in industries producing differentiated products. To
understand the scope of the approach developed here, note that about
10.4 percent of agricultural, mining, and manufacturing industries pro-
duce commodities; a further 27.6 percent produce somewhat differenti-
ated goods where the analytical bite of the Ricardo-Viner predictions
already appears to be much diminished.59 The remainder, which is 62.0
59
Homogeneous product industries account for about 19.8 percent of all US production among
these industries, while moderately and fully differentiated products account for about 26.8 percent and
53.38 percent of production, respectively.
60 Product
90
Product differentiation
differentiation Product differentiation
Homogeneous
Homogeneous Homogeneous
Mod.
Mod.differentiated
differentiated Mod. differentiated
Percentage Industries with Trade Supporters
Percentage Industries with Trade Supporters

Differentiated
Differentiated 80 Differentiated
50
70
40 60
50
30
40
20
30
10 Net-Importer 20
Net Importer Neutral
Neutral Net-Exporter
Net Exporter Net Importer Neutral Net Exporter
Support for All Agreements Support for KORUS/AUSFTA
Figure 2
Support for Liberalization as a Function of Competitiveness and
Product Differentiationa
a
Predicted percentages of industries with significant expressions of support for free trade agree-
ments as a function of product differentiation and industry competitiveness vis-à-vis the particular
agreement partner(s). Competitiveness is linked closely with the likelihood of support in commodity-
producing industries (10.4 percent of all industries analyzed), and much less so in industries whose
products are moderately differentiated (27.7 percent) or differentiated (61.9 percent). For clarity, con-
fidence bounds are omitted; hypothesis tests for first differences are presented in Table 3.
percent of all agricultural, mining, and manufacturing industries, pro-

duce relatively differentiated products where the Ricardo-Viner predic-
tions are not validated. In these latter two groups, the industry-level
predictions of models emphasizing product differentiation and firm
heterogeneity are more strongly supported.
An additional finding is that rates of support for trade liberalization
are lower in net-exporting industries that produce differentiated prod-
ucts than they are in those producing relatively homogeneous goods.
This is surprising because most models with firm heterogeneity pre-
dict a healthy number of protrade firms in the most competitive indus-
tries. Two factors may account for this. First, it could be that product
differentiation undermines support for trade liberalization in highly
competitive industries by activating opposition due to intra-industry
trade flows.60 The pool of potential supporting firms (or unanimous
associations) therefore shrinks as product differentiation grows. Sec-
ond, it could be that product differentiation plays a buffering role in
60
On this point, see Osgood 2016a.
international trade.61 Distributive consequences are less sharp, and so

the motivation to publicly support trade liberalization is reduced rela-
tive to competitive homogeneous product industries where price dif-
ferences are dominant and demand is elastic. Overall, it seems that
industry-level competitiveness simply does not drive position-taking in
industries where products are differentiated.
Each of the alternative explanations of support for trade liberaliza-
tion receives some empirical endorsement. Larger industries are more
likely to support trade liberalization, even conditional on export com-
petitiveness. The potential for fdi and the foreign sourcing of inputs
also drive public expressions of support for trade agreements, although
the predicted effects of the variable fdi potential differs noticeably across
the two samples. But importantly, the main results on the impact of
product differentiation hold regardless of whether or not the alternative
variables are included. Moreover, the estimated effects of the alternative
explanations are insufficient in magnitude to fully explain the wide-
spread phenomenon of support in import-competing industries, while
product differentiation can.
Intra-Industry Divisions and Support in Both Countries
This section explores two additional outcomes that are at odds with
the traditional accounts of firm preferences over trade: industries that
have public supporters and opponents of trade liberalization and indus-
tries that have bilateral support for trade liberalization, with foreign and
domestic producers joined in support of increasing trade in the same
industry. As divisions and support in both country partners are mainly
present in the korus and ausfta agreements, it is important to note
that the inferences on such outcomes should primarily be restricted
to those cases. But such outcomes do occur sporadically in the other
agreements, so it is worthwhile to consider how introducing that data
affects the estimation. The main results are presented in Table 4.
First, consider the findings from a multinomial logistic regression
that uses the complete information on all four potential industry posi-
tions: oppose, divided, support, and no position on a particular US trade
agreement. The probability of outcome j is modeled by
Pr( j| ⋅) = Exp(lj ) (S j Exp(lj ))–1,
61
Krugman 1981.
Table 4
Intra-Industry Divisions and Simultaneous Support for Agreementsa
korus/ausfta All kor/aus All
Outcome Oppose Divided Favor No Pos. Divided Both Happy Both Happy
Homogeneous → Mod. differentiated –0.97 6.94** –15.40** 9.71** 5.94* 7.12 6.63
Homogeneous → Differentiated –2.51 11.97** –15.55** 6.59 9.60** 13.06 15.63**
Imp. competing → Balanced trade –4.59*** –17.28*** 21.61*** 1.14 –19.79** –6.42 –3.40
Balanced trade → Export competing –1.33 –0.27 4.91 –3.88 4.73 –20.84*** –20.41***
FDI potential –0.53** –2.71** 5.17** –1.91 –5.43*** 3.68** 20.64***
Imported inputs –0.08 –3.90 –2.09 6.14** 4.60 10.15** –9.12***
Downstream exports 0.01 1.87* –1.02 –0.97 2.14** 1.11 1.46
Sales –0.32 15.52*** –1.33 –13.94*** 2.88 12.47** 18.86***
Sample size 806 4836 806 4836
LRT p-value .006*** .003*** .214 .013**

***p < 0.01, **p < 0.05, *p < 0.10
a
All estimates are first differences from a multinomial logistic regression (the first five columns) or logistic regression; changes in continuous variables are from the
median to 90th percentile except for the comparative advantage proxy, which is from the 10th percentile to the median for the first simulation. Remaining variables are
held at their median or, for factors, mode. Likelihood ratio test considers models with and without the measure of differentiation. The first five columns present simulated
changes in the percentage chance of various industry stances on all US ftas, 1995–2012. Product differentiation is positively linked with intra-industry divisions and
no position being taken. The last two columns show the links between various predictors and public support for trade liberalization both in the US and in the relevant
trade partner(s).
where and l1 = 0 and the linear predictor for outcome lj for j ∈ {2,3,4}
is given by
lj = (bj 0 + bj1CA + bj 2CA2 + j 3–4

Diff + j′x).
The squared term on the comparative advantage proxy is employed

to examine the question of whether there might be nonlinear effects of
competitiveness on intra-industry disagreements. The x vector includes
the measures of fdi potential, imported inputs, downstream exports, and
sales, along with an additional intercept for the korus agreement as
described above. First differences should be interpreted as if the korus
agreement, where intra-industry divisions were overwhelmingly con-
centrated, is under consideration.
The focus on firm heterogeneity suggests that intra-industry divi-
sions should be more likely where the industry’s product is differenti-
ated. This conjecture is supported in both the smaller and larger samples,
suggesting that such disagreements are much more likely in industries
where the potential for export- and import-competition increasing ex-
ists in the wake of trade liberalization. A natural follow-up question is
whether or not the extent of comparative (dis)advantage is fundamental
in determining where divisions occur. There is no evidence of any non-
monotonic effect of competitiveness on the presence of divisions, but
there is some indication that divisions are concentrated in the least com-
petitive US industries. This complements the above finding that opposi-
tion to trade liberalization is being undercut in uncompetitive industries
by the emergence of net-import industry supporters of free trade.
The last two columns of Table 4 examine instances where an indus-
try in the United States and in the fta partner country both publicly
express support for the trade agreement. The model for this outcome
(both happy) is given by:
Pr(Both Happy| ⋅) = InvLogit( b0 + b1CA + b2CA2 + 3–4

Diff + ′x),
where x includes the same variables as the intra-industry divisions

models above. This outcome is more likely to occur where a product is
differentiated and where the United States is relatively uncompetitive
or on par with the foreign trade partner. As in the cases described above,
this suggests that product differentiation fundamentally alters the dis-
tributive consequences of trade liberalization, and in so doing creates
transnational coalitions in favor of trade agreements within the same in-
dustry. These implicit alliances cannot be explained using a specific or

mobile factors version of the standard trade model, but follow naturally
from an emphasis on firm heterogeneity in export ability combined with
product differentiation.
It is worth reemphasizing that intra-industry divisions and support
in both country partners tend to occur in industries where the United
States is relatively uncompetitive. In both cases, it appears that opposi-
tion to trade liberalization is being undermined asymmetrically. Op-
ponents of trade in the United States only must confront support for
trade not only from more competitive industries but also from within
their own ranks. This finding, along with the relative paucity of opposi-
tion in comparison with public expressions of support, suggests a pos-
sible explanation. It may be that the relatively smaller scale of foreign
producers, combined with the enormous size and demand for hetero-
geneous varieties in the United States, shelter US firms from some of
the most harmful effects of foreign competition. Rather than seeing
intra-industry divisions in moderately competitive industries then, we
see divisions only in US industries that are facing intense competition
from foreign producers. And even despite that competition, the scale
and reach of America’s largest corporations mean that at least some US
firms still benefit from trade with that country.
An especially plausible alternative explanation is that US corpora-
tions are supporting liberalization in uncompetitive industries be-
cause of opportunities for vertical multinationalization. There is some
evidence that the potential for fdi among US firms leads to bilateral
support in both countries, although there is no consistent connection
between this variable and the intra-industry divisions in this sample.
Moreover, the impact of product differentiation and export competi-
tiveness holds conditional on the measure of fdi potential, suggesting
that significant additional variance is explained by considering these
concepts independent of any effects on fdi. These results are also robust
to alternative measures of fdi, such as US related–party imports.
Outside and Inside Lobbying on FTAs
This section presents the results on the extent of coordination of lob-
bying efforts between industry associations and firms. I consider several
outcomes, all of which are dichotomous and use the following model
specification:
Pr(Lobby outcome| ⋅) = InvLogit(b0 + b1CA + 2–3

Diff + ′x).
Because the outcomes in this section are ubiquitous across the agree-
ments, as with public expressions of support, no additional intercept for
the korus cases is included to generate the first differences. The vector
of additional covariates, x, therefore includes only the measures of fdi
potential, imported inputs, downstream exports, and sales, all of which are
logged. The results of these models are presented in Table 5.
The first two outcomes consider whether firms or associations only
take public positions on trade agreements. Because virtually all US in-
dustries are represented by at least one trade association, position-taking
by firms represents a challenge to standard approaches where industries
ought to be united over trade, whether in support or opposition. Why
don’t associations participate in outside lobbying if all firms in the in-
dustry are affected by trade similarly? The other three outcomes consider
issue-specific inside lobbying directly, and again explore whether firms
lobby on their own or if associations take on the main burden of lob-
bying activity. Variation in these outcomes is also surprising from the
perspective of standard accounts of trade policy for the reasons described
above.
Industries differ fundamentally in who takes the lead in public po-
sitioning when signaling to policymakers in the context of the outside
lobbying campaigns associated with ftas. Among industries taking
public positions, a high level of product differentiation is associated
with a significantly higher percentage chance (around 18.7 percent) that
firms alone will take public positions. Similarly, differentiated prod-
uct industries have a significantly lower chance (around 33.5 percent)
that associations will take public positions on their own. Both of these
are consistent with the findings on the substantive content of public
positions. Depending on their comparative advantage, commodity-
producing industries tend to agree on trade liberalization and they
are therefore much more likely to participate in public debates over
trade as a coherent industry via their trade associations. In contrast,
industries producing the most differentiated products are much more
likely to have firms taking the lead in announcing public positions and
their associations taking a backseat. These findings are entirely robust
to the addition of controls for industrial concentration, the number
of firms and associations, and association resources. See Appendix C of
the supplementary material.62
This same pattern recurs in the case of inside lobbying, where
62
Osgood 2016c.
Table 5
Modeling Firm- or Association-Centric Patterns of Lobbyinga
Only
Only Firms Associations Only
Take Take Only Firms Associations
Positions Positions Lobby Lobby Both Lobby
Homogeneous → Mod. –3.39 –8.19* –2.18 0.41 10.17***
differentiated
Homogeneous → Dif- 19.57*** –34.64*** 12.12** –10.29*** 13.82***
ferentiated
Imp. competing → Bal- 10.35** 1.28 8.91** –5.40** –10.19***
anced trade
Balanced trade → Export –1.64 1.43 –5.99 1.94 2.66
competing
FDI potential –8.27*** –3.20 –2.84 –4.89*** 4.80**
Imported inputs 5.46* –1.85 3.78 0.20 –4.13***
Downstream exports 4.18*** –2.03** –1.53* 0.39 1.69**
Sales 4.69** –18.39*** 9.73*** –5.30*** 10.79***
Sample size 1845 1845 1499 1499 1499
LRT p-value .000*** .000*** .001*** .001*** .000***
***p < 0.01, **p < 0.05, *p < 0.10

a
All estimates are first differences from logistic regression models; changes in continuous variables
are from the median to the 90th percentile except for the comparative advantage proxy, which is
from the 10th percentile to the median for the first simulation. Remaining variables are held at their
median or, for factors, mode. Likelihood ratio test considers models with and without the measure of
differentiation.
industries communicate directly with the government. For highly dif-

ferentiated products, firms are much more likely to be the only actors
engaged in direct lobbying. Associations are also significantly less likely
to be the sole industry representatives lobbying Congress or the execu-
tive branch. Most striking of all, industries producing either moderately
or fully differentiated products are far more likely to have firms and
associations involved in lobbying efforts. While this finding is open to
multiple interpretations, it is consistent with a focus on the heteroge-
neous preferences of firms over trade liberalization within a particular
industry: it may mean explicit differences of opinion, as has been docu-
mented, or simply differences in the intensity of preferences.
Conclusion
For those familiar with the evolution of the literature on trade politics,
the recent politics of US ftas presents a conundrum. Contemporary
trade politics appears to be driven by two essentially factoral coalitions.
Opposed to trade are labor unions and a progressive alliance of human
rights, environmental, and identity groups.63 In favor of trade is corpo-
rate America, with an outsize role played by the largest corporations
and multinationals.64 Extant models of trade politics, however, predict
that coalitions should be based on industries (especially owners of capi-
tal, that is, firms) because interindustry factor mobility is relatively low
in the current era.
This article rationalizes these two apparently contradictory stylized
facts, concluding that trade politics has entered a new phase where co-
alitional boundaries are determined not by factor or industry, but rather
by firm size. And the key determinant of this evolution is the rise of
product differentiation. Industries are now internally divided between
export-capable firms, which stand to reap large gains from selling their
unique varieties abroad if trade is liberalized, and small- and medium-
size firms that have little scope for international expansion. Some of
these smaller firms may oppose trade liberalization, as witnessed in the
debate on korus, but many of them remain largely indifferent or disen-
gaged on the trade issue. This may reflect the smaller size of America’s
trade partners, and also the buffering effect of trade liberalization in a
world where unique varieties have only highly imperfect substitutes.
The focus on industry-level implications of firm heterogeneity and
product differentiation in this article is therefore complementary to
recent work on the determinants of firm-level lobbying and the sup-
port of larger firms for trade liberalization.65 These studies suggest that
both preference intensity and political resources are concentrated in the
hands of supporters of trade; opponents of trade are, in contrast, smaller,
less vehement, and at a significant disadvantage in terms of mobilizable
political resources. Opponents to trade face structural disadvantages in
collective action that feed into a strong bias in public position-taking
and lobbying toward supporters of trade liberalization. This approach
also implies that the protrade coalition should primarily be composed
of large and successful firms across almost all industries, at least where
products are differentiated. And these actors have been quite successful
63
Dreiling and Robinson 1998; Rupert 2000.
64
Plouffe 2012; Kim 2013.
65
Kim 2012; Madeira 2014; Plouffe 2012; Osgood et al. 2016.
both collectively, as the regular ad hoc coalitions formed to push trade

liberalization show, and individually, as demonstrated by the strong bias
toward support in lobbying on trade.
Collectively, these changes have undermined industrial opposition to
trade liberalization, as when firms in net-importing industries publicly
express support for liberalization, or even disagree with other firms in
their industry. This is especially true where foreign trade partners are
the most credible competitors with the United States. The rise of prod-
uct differentiation also seems to have increased indifference to liberal-
ization, even in those industries where trade partners export much more
than they import. Competition is no longer just about price, but also
about branding and differentiation. In this context, opposition is not so
much undermined as attenuated. The net result is that industrial oppo-
sition to trade liberalization in the United States has been sharply cur-
tailed except in the few remaining industries where the United States
remains highly uncompetitive and where products are commodified.
Supplementary Material
Supplementary material for this article can be found at https://doi.org/10.1017
/S0043887116000174.
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The Breakdown of Industrial

T HE trade politics literature has long debated whether trade pits

Ricardo-Viner approach—that trade should divide competitive and

arguing that the concentration of the benefits of trade in the hands of

Gaps in the Standard Approaches

trade associations over recent US trade agreements provides ample evi-

All Agreements korus/ausfta Only

Australia and the Australian-based Hardy Wine Company both sup-

Association noted when discussing korus, “Within the steel industry

section develops this idea, emphasizing the importance of product dif-

The third condition for intra-industry divisions over trade, which

Public Position-Taking on Preferential Trade Agreements

of support and opposition to trade agreements largely reveal the genu-

lack of public opposition that contradict the core propositions devel-

both the decision to conclude such agreements and the parameters of

the Modification and Replacement Parts Association supported the

These divisions arise straightforwardly from the model’s setup. For

of certain agreements, as discussed above. The next set of predictions

The justification for this prediction is the same as for Prediction 1. As

Instances of this last outcome abound, for example, the US adhesives

Lobbying on Free Trade Agreements

here suggests a similar conclusion, but the context (reciprocal liber-

Another explanation for intra-industry divisions over trade liberal-

If industries are defined in overly broad terms, fundamentally different

Cases, Data, and Methods

lobbying trade associations took a public position, while only a minority

Trade agreements in force,

available at http:/www.cambridge.org/core/terms. http://dx.doi.org/10.1017/S0043887116000174

Trade agreements in force

available at http:/www.cambridge.org/core/terms. http://dx.doi.org/10.1017/S0043887116000174

flows.47 Most commonly, an industry is presumed to be at a comparative

Each of these figures is taken from the 2009 US Direct Investment

particular country. This variable is called downstream exports. Industry

Pr(Support| ⋅) = InvLogit(b0 + b1CA + 2–3

Effect of Relative Exports Conditional on Differentiation

for trade liberalization in industries that otherwise would not support

Percentage Industries with Trade Supporters

Support for All Agreements Support for KORUS/AUSFTA

percent of all agricultural, mining, and manufacturing industries, pro-

international trade.61 Distributive consequences are less sharp, and so

Pr( j| ⋅) = Exp(lj ) (S j Exp(lj ))–1,

available at http:/www.cambridge.org/core/terms. http://dx.doi.org/10.1017/S0043887116000174

lj = (bj 0 + bj1CA + bj 2CA2 + j 3–4

The squared term on the comparative advantage proxy is employed

Pr(Both Happy| ⋅) = InvLogit( b0 + b1CA + b2CA2 + 3–4

where x includes the same variables as the intra-industry divisions

dustry. These implicit alliances cannot be explained using a specific or

Pr(Lobby outcome| ⋅) = InvLogit(b0 + b1CA + 2–3

***p < 0.01, **p < 0.05, *p < 0.10

industries communicate directly with the government. For highly dif-

both collectively, as the regular ad hoc coalitions formed to push trade

———. 2009. “Estimating the Effects of Free Trade Agreements on International

Feenstra, Robert C., and Gordon H. Hanson. 2004. “Intermediaries in Entrepôt

———. 2011. Understanding Global Trade. Cambridge, Mass.: Harvard Univer-

Rupert, Mark. 2000. Ideologies of Globalization: Contending Visions of a New World

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p < 0.01, p < 0.05, p < 0.10