Framing Business Interests: How Campaigns Affect Firmss Positions on Preferential Trade Agreements

Abstract

What determines firms' policy positions on preferential trade agreements (PTAs)? Existing theories about PTAs assume a certain distribution of firm preferences and power, but no systematic empirical data exists to verify such theories. Furthermore, studies have assumed that company executives make up their minds in a perfect information environment, in which the distributional effects of PTAs are known to them before signing. This paper challenges these assumptions by using an original survey of firm executives regarding the Trans-Pacific Partnership Agreement (TPP) conducted in Japan in February 2011, before the Japanese government decided to participate in the negotiations. We obtained responses from around 2,100 firms in manufacturing and service sectors. The survey was embedded in the sub-national variations in anti-TPP campaigns in which 24 prefectural governments published estimated costs of joining TPP on the agricultural sector, and the remaining 23 governments did not. After controlling for a host of company and industry-level co-variates and addressing potential endogeneity issues, we found that companies that operated in negative campaign prefectures were fifteen percentage points more likely to predict that the TPP would harm their businesses. The findings call for more research on how firms form their policy positions in an imperfect and politicized information environment.