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Do Voters Reward Politicians for Trade Liberalization? Evidence from South Korea

Abstract

Do voters reward politicians for trade liberalization? We examine this question by analyzing voter responses in South Korea to the US-Korea Trade Agreement. Exploiting a change in party positions on the FTA over time, we examine the effects of different party positions on outcomes in the legislative and presidential elections. We find that voters who expect direct gains (losses) specifically from the treaty increase (decrease) support for the pro-trade party. However, voters in export-oriented industries do not reward politicians for a free trade agreement that does not directly affect their well-being. Our analysis of seven waves of individual-level panel survey data also demonstrates that a short-term change in a candidate’s position on the FTA influences voter decisions in the upcoming presidential election. The findings suggest that voter preferences with regard to trade can materialize into voting behavior when voters have a clear ex ante expectation of specific gains or losses from the trade policy.

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Notes

  1. 1.

    The geographical unit of our analysis is the county (si/gun/gu in Korean), which is the second lowest unit in the South Korean administrative system. The lowest unit is the town (eup/myeon/dong in Korean).

  2. 2.

    I choose to use the term ‘center-left party,’ or ‘conservative party’ instead of using the exact names of the parties to avoid confusion since political parties have frequently changed their names. I use ‘center-left party’ to indicate the Democratic United Party (2011-), which succeeded the Democratic Party (2008-2011), which was itself a merger of the United New Democratic Party (2007-2008) and the Democratic Party (1995-2008). The United New Democratic Party was formed out of the Uri Party (2003-2007). I use ‘conservative party’ to indicate the Grand National (Hannara) Party (1997-2012), which was renamed the New Frontier (Saenuri) Party in February 2012.

  3. 3.

    We used the keyword Hanmi FTA (KORUS-FTA). As a reference point, the keyword ‘North Korean nuclear’ (Bug-haeg) was mentioned in 17,661 articles during the same period. We counted the number of news articles available in BIG KINDS (Korean Integrated News Database), which provides access to 47 major news sources, including national and regional newspapers and broadcast television news.

    Fig. 1
    figure1

    Monthly Number of News Articles on the KORUS FTA, 2006-2012

  4. 4.

    South Korea was among the US’s largest export markets for agricultural products, and has been considered one of the most closed markets among members of the Organization of Economic Cooperation and Development (Cooper & Manyin, 2006). Automobiles and textiles were among South Korea’s top exports to the US while pharmaceuticals were one of the top imports from the United States. See Table A3 in the appendix for the list of South Korea’s top export and import products to and from the United States.

  5. 5.

    “Outcomes of the 2nd Round of Korea-U.S. FTA Negotiations,” Press Release, Ministry of Foreign Affairs of Republic of Korea, July 18, 2006.

  6. 6.

    The Hankyoreh, “Lawmakers Threaten to Reject Ratification of Korea-US Free Trade Pact.” February 5, 2007.

  7. 7.

    Jung Ha-won, “Candidates Approach Economy Differently.” Korea Joongang Daily, December 8, 2007.

  8. 8.

    Jung Seung-hyun and Lee Eun-joo, “FTA Faces Rocky Road Even If Deal Is Reached,” Korea Joongang Daily, November 12, 2010.

  9. 9.

    Ser Ouro-ja, “Lee Lauds FTA, Defends Concessions,” Korea Joongang Daily, December 14, 2010.

  10. 10.

    Moon Gwang-lip, “FTA Becomes Hot Button Issue in Run up to Election,” Korea Joongang Daily, February 15, 2012.

  11. 11.

    When the KORUS FTA is mentioned in passing with reference to multiple issues, the candidate’s position is coded as “No revealed position.” See Section A3 in the appendix for detailed coding rules and example statements.

  12. 12.

    This pattern is similar to Guisinger (2017) finding on the relationship between issue salience and the degree of divergence in party positions on trade in the context of the US presidential election.

  13. 13.

    Lee Eun-joo and Limb Jae-un, “Winners and Losers in KORUS Deal,” Joongang Daily, November 23, 2011.

  14. 14.

    Korea Automobile Manufacturers Association, “Automotive Industry’s Opinion on Final Settlement of the KORUS FTA,” December 6, 2010. Available at http://www.kama.or.kr/BoardController?cmd=V&boardmaster_id=Bodo&board_id=223&menunum=0002&searchGubun=titlecontent&searchValue=FTA&pagenum=4%23

  15. 15.

    Korea Federation of Textile Industries (KOFOTI), “Textile Fashion Industry Announces a Statement Calling for Early Ratification of the KORUS FTA,” January 22, 2008. Available at http://www.kofoti.or.kr/notice/boardView.do?Code=KNM%26Uid=989916760%26srch_input=FTA%26scType=all%26srch_date1=%26srch_date2=%26currRow=4

  16. 16.

    Trade data with the US were collected at the 2-digit HS code level from the Korea Customs Service. We then used the crosswalk from the Industrial Statistical Analysis System (ISTANS) to map the 2-digit HS code to the 3-digit Korean Standard Industrial Classification (KSIC).

  17. 17.

    As shown in the appendix Table A3, automobiles and textiles were among the top export products from South Korea to the US, and pharmaceutical products were among the top import products from the US to South Korea. According to the 2010 trade statistics, vehicles (HS 87), apparel and clothing accessories (HS 61), and knitted or crocheted fabrics (HS 60) were ranked first, seventh and eighth in terms of the trade balance with the United States. Pharmaceutical products (HS 30) were among the top 7 import competing products with a negative trade balance with the United States.

  18. 18.

    The US agreed to immediately eliminate tariffs on 61.1% of textiles and clothing products (in terms of import volume) and gradually eliminate tariffs on other textile and clothing products.

  19. 19.

    Specifically, South Korea agreed to allow US pharmaceutical makers to apply for increased reimbursement and to appropriately recognize the value of patented pharmaceutical products, among other concessions.

  20. 20.

    Large corporations are defined as those firms that have more than 500 employees. Medium-sized firms are those that have more than 50 and less than 500 employees. Our measure of the share of large corporations is calculated by dividing the number of registered corporations with more than 500 employees by all registered firms in a given county. We calculate the share of medium-sized firms by dividing the number of medium-sized firms (with 50-500 employees) by all registered firms in a given county.

  21. 21.

    Province fixed effects are included because South Korean elections are heavily influenced by regionalism (Kang, 2016; Lee & Hyeok, 2003; Lee, 1998; Jeong, 2012). We include nine province dummy variables for Seoul, Geyong-gi (including Incheon), South Geyongsang (including Busan, Daegu, and Ulsan), North Geyongsang, South Jeolla (including Gwangju), North Jeolla, South Chungcheong, North Chungcheon (including Sejong), and Jeju. The baseline province is Gwangwon. A change in the conservative party’s vote share between the 2002 and 2007 elections is included to account for any unobservable county-level trend toward or against the conservative party. Also, it is important to control for the vote share of a third-party candidate in the 2007 election, Lee Hoi-chang, who received 15.1% of the vote in 2007 but endorsed Park Gun-hye in the 2012 election.

  22. 22.

    The unemployment rate data are available by quarter, and we average unemployment rates over four quarters to get a yearly unemployment rate. The data is from the Economically Active Population Survey, available through the Korean Statistical Information Service.

  23. 23.

    We use the data from the Population Census available through the Korean Statistical Information Service.

  24. 24.

    Previous empirical studies of Korean congressional elections suggest that voters are likely to vote sincerely according to their party preferences in casting their PR votes, but vote strategically in SMD votes. Also, voting for single-member districts can be influenced by individual candidate characteristics and the electability of the candidate of the preferred party (e.g., Cho & Choi, 2006, Park, 2009a).

    Table 1 Trade Competitiveness and Change in Conservative Party’s Vote Share
  25. 25.

    According to the Political Funds Act in South Korea, corporations or organizations are strictly prohibited from contributing any political funds.

  26. 26.

    One may raise a concern that frequent interviews might have shaped respondents’ views on the ongoing election campaign. In that case, respondents in our survey data may be systematically different from the population. Yet, our comparison of voting intentions of surveyed respondents and voting outcomes reveals no significant discrepancy in their support for presidential candidates. According to the survey conducted a week before the election, 51.3% and 47.3% of survey respondents answered they would vote for Park Geun-hye and Moon Jae-in, respectively. Indeed, Park received 51.6% of votes, and Moon received 48.0% of votes on the election day. This shows that survey respondents were not systematically affected by frequent interviews.

  27. 27.

    The survey did not include any information on respondents’ sector of employment, so it was not possible to calculate the expected sector-related benefits and losses from the KORUS FTA for each individual and examine the effects on their voting behavior.

  28. 28.

    While South Korea has a multi-party system, Park Geun-hye and Moon Jae-in were candidates from the two major parties. The two candidates received 99.6% of the total votes in the election. Park Geun-hye was nominated as the conservative party’s candidate on August 20, 2012 and Moon Jae-in was nominated as the center-left party’s candidate on September 16, 2012. An independent candidate, Ahn Cheol-soo, garnered considerable support during the 2012 campaign but resigned from the race on November 23, 2012 before the official registration for candidacy.

  29. 29.

    Lee Ji-hye, “Moon Jae-in: Hanmi FTAneun Junsudaeya Handa [The KORUS-FTA Should be Abided by].” Maeil Business Newspaper, July 23, 2012.

  30. 30.

    For instance, see “Moon Jae-in: Hanmi FTA Bandeusi Jaehyeopsang Hal Geot [The KORUS-FTA Should be Renegotiated].” Maeil Business Newspaper, October 18, 2012 and Park Heung-doo, “Moon: Hanmi FTA Jaehyeopsanghae Bul-i-ig Gaeseon [Will Improve on Disadvantages through the KORUS-FTA Renegotiation].” The Kyunghyang Shinmun, October 19, 2012.

  31. 31.

    One may be concerned about the possible reactivity of respondents to the frequent interviews, which could potentially affect respondents’ views about the election campaign and their voting decisions. However, we see no such pattern from survey respondents. In the December survey conducted a week before the election, 51.3% of survey respondents answered that they would vote for Park while 47.3% indicated their intention to vote for Moon. This was indeed very close to the actual election result (Park received 51.6% and Moon received 48.0%). This shows that frequent interviews did not significantly shape respondents’ voting intentions.

  32. 32.

    Responses to the October survey conducted about a week in advance of the announcement are coded as “0” for Post-Announcementt, and responses to the December survey are coded as “1”.

  33. 33.

    Ideology is measured on a 0-10 scale with 0 denoting very liberal and 10 denoting very conservative. Income is measured on a 1-11 scale, with 1 indicating monthly family income of less than 1 million won and 11 indicating monthly family income of more than 10 million. A binary indicator for college education is included to account for the effects of education. Home ownership is also a binary indicator coded 1 for those who own home and 0 otherwise. To account for the effects of religion, we created three binary indicators for Buddhist, Catholic, and Protestant. Lastly, we capture party identification with two binary variables for supporters of the conservative Saenuri (New Frontier) Party and those of the center-left Minju Tonghap (United Democratic) Party.

  34. 34.

    We do not include demographic controls in models with fixed effects for individuals because demographic controls are time-invariant and do not vary within individuals.

  35. 35.

    We also present the trend of voters’ support for presidential candidates using the survey conducted by the Gallup Korea from August before the presidential election. The trend presented in Figure A1 in the appendix shows that there was no notable pattern around the timing of Moon’s announcement on the KORUS FTA.

  36. 36.

    Choe Sang Hun, “South Korea Approves Free Trade Pact With U.S.”New York Times, November 22, 2011.

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Acknowledgments

For valuable feedback and suggestions, we thank Pablo Pinto, Su-Hyun Lee, Yotam Margalit, Johannes Urpelainen, and panel participants at the 2019 Annual Meeting of the American Political Science Association, as well as the editors and reviewers of this journal. This work was supported by a Korea University Grant (K1806681).

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Author contributions to research design and conceptualization: Sung Eun Kim (75%), Sujin Cha (25%), statistical analysis: Sung Eun Kim (75%), Sujin Cha (25%), writing: Sung Eun Kim (90%), Sujin Cha (10%). The order of authors reflects the significance of the authors’ contributions

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Kim, S.E., Cha, S. Do Voters Reward Politicians for Trade Liberalization? Evidence from South Korea. Rev Int Organ (2021). https://doi.org/10.1007/s11558-021-09442-0

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Keywords

  • Trade preferences
  • Preferential trade agreement
  • Free trade agreement
  • Voting behavior
  • Electoral politics