How Media Opinion Influences Imports in the US

Abstract:

Does public opinion influence US imports? Do countries with a good reputation export more to the US? And vice versa? Based on an extended trade gravity model, this paper employs news data from the GDELT database and US monthly import data to create an indicator of the influence of public opinion to examine the effects of US domestic public opinion on imports. Our research findings suggest that: (i) US public opinion influences US imports. Specifically, (ii) when public opinion turned negative during 2013-2017, it exerted a significantly negative effect on US imports; when public opinion was favorable during 2008-2012, it exerted an insignificantly positive effect on US imports. (iii) According to the pulse response function and variance decomposition, negative public opinion exerted a more significant and more lasting effect on US imports compared with positive public opinion. (iv) It can be discovered after further decomposing such effects on product categories that significant product heterogeneity exists in the public opinion effects on US imports: Complex and differentiated products are more influenced by negative public opinion while homogeneous and intermediate products are more influenced by positive public opinion.

Keywords:

孟丽君

public opinion, trade barriers, US imports, product heterogeneity JEL Classification Codes: E7, F14

DOI: 10.19602/j.chinaeconomist.2020.11.05

1. Introduction

李钢

Soft power, especially the power to sway public opinion, is a key aspect of international economic and political competition in today’s world. In recent years, some countries have attempted to influence public opinion as a new non- tariff barrier for trade protectionism. The sub- prime mortgage crisis that erupted in 2008 dealt a heavy blow to the US economy. The domestic economic downturn and rising unemployment rate topped public concerns, giving rise to protectionist sentiments. US trade protectionists often blamed trade for domestic employment woes, attributing the loss of US manufacturing jobs to external factors such as imports and service outsourcing (Acemoglu, 2016; Autor, 2013). Change in US public opinion is reflected in US press coverage about major trading partners.

During the period from 2008 to 2012 , the US press coverage sentiment index for various countries was above +5.1 This value dived below +2 in 2013-2014 and below -1 in 2015-2017. The downward trend is still continuing. Negative US press coverage about the same countries increased steadily. Coincidentally, growth in total US trade deficits slowed. In 2008, US trade deficits totaled 88.197 billion US dollars. By 2016, this amount dropped to 79.775 billion US dollars. In 2017, US trade deficits rose again to reach 86.233 billion US dollars, but still stayed below the 2008 level. We suspect that a close correlation exists between public opinion and US imports that curbed US trade deficit growth.

Hence, this paper investigates how US public opinion about major trading partners influences US imports.

2. Literature Review and Research Hypotheses

Based on the US media environment and theories on public communication and consumer attitudes, this paper puts forth three hypotheses for explorative research on the effects of public opinion on US imports.

2.1 Effects of Public Opinion on US Imports

According to consumption psychologist Daniel Carson’s consumption attitude theory, perception and emotional experience comprise the bulk of consumer attitude and influence consumer decision and behavior (Ajzen, 1991). As a key source of perception and emotional experience, public opinion has an important influence on consumers’ daily life (Mccombs and Reynolds, 2002). Studies suggest that public opinion affects the audiences’ emotional experience of a particular thing, including their preference and emotional reaction to the object or event (Bounie, 2005; Stimson, 1991; GonzalesBailon et al., 2012). Studies on the relationship between public opinion and value perception found that public opinion influences consumers’ perception of the product’s value. With asymmetrical access to information, the press in one country tends to exaggerate negative news about other countries, and trade-related negative news about product quality and company reputation in other countries constitutes an implicit trade barrier that inflicts serious harm on the exporting country (Ren, 2013). Such a negative public opinion will lock a country’s product quality reputation at a certain level, and such a value perception will stay for a long time (Tang and Li, 2011; Rajul and Lawrence, 2013; Cage and Rouzet, 2015). Hence, we put forth the following hypothesis:

Hypothesis 1: Change in the public opinion environment has a significant effect on US imports.

2.2 Influence of Positive and Negative Public Opinion

While positive public opinion elicits positive consumer attitudes, negative public opinion leads to resistance and resentment (Herr and Kardes, 1991). Normally, negative public opinion is the key factor in consumers’ purchase decisions and sways consumer decisions more than positive public opinion does (Lee and Thadani, 2009). According to Kroloff and George (1988), the influence of negative public opinion is fourfold that of positive public opinion. Positive public opinion about a country is beneficial to its international image and fosters a more favorable environment for its tourism, trade, labor market, and political relations (Anholt, 2011). For a multinational firm, public opinion plays a vital role in shaping its international image, and positive international public opinion helps boost the firm’s overseas sales, brand reputation, and customer loyalty (Till and Nowak, 2000; Brown and Dacin, 1997). Negative press coverage will give rise to negative opinions among the US public about relevant countries and firms (Kiousis and Wu, 2015). Hence, we put forth the following hypothesis:

Hypothesis 2: Positive and negative public opinion will exert different effects on US imports.

2.3 Time Distance: the Influence of Public Opinion

Existing studies consider that the influence of public opinion will diminish and ultimately vanish over time. Yet with different emotional shocks to the public, positive and negative public opinions are remembered for different durations of time. Normally, negative reports attract more consumer attention and create greater emotional shocks to the audience, and negative impressions are harder to forget (Susan, 1980). Unfavorable opinions may cause a company to lose its market, and the impact on exports is extensive and lasting (Xu and Xu, 2008). Hence, the following hypothesis is proposed:

Hypothesis 3: Based on time distance, positive and negative opinions influence US imports for different durations of time.

3. Typified Facts of Public Opinion 3.1 Definition and Classification of Public Opinion

Public opinion can be understood as social perception and opinion about a specific matter. While some public opinions are formed spontaneously, others are created by the mainstream media. Public opinion is formed through unconscious communication and exists as a critical force. On the contrary, media opinion is manipulated by “agenda-setting” resulting from interaction among various interest groups and compound forces. With changing forms of media, the monopoly of news media has led to a transition of public opinion2 from a critical force to media opinion3 as a manipulative force that wields a huge - and sometimes hidden - influence in people’s daily life (Guo, 2010).

3.2 US Press Coverage about Other Countries

In this paper, all public opinion data is presented in the form of media opinion based on the world’s largest open database of political events: the Global Database of Events, Language and Tone (GDELT) 4, which marks metadata for every news report including detailed information such as subject matter, place, personal name, and type of event. As its biggest advantage, the GDELT database marks the “sentiment index” for each news article with natural language processing technology, i.e. the average tone (“AvgTone”) of the press coverage. This index is derived from the average score of articles when mentioning the event ranging from -100 (extremely negative) to +100 (extremely positive); common values range between -5 and 5.

As can be seen from Table 1, the US press has been the most critical of countries that sequentially are China, Russia, Israel, Canada, the UK, Mexico, and Japan. In terms of the number of public opinion reports, there has been a steady increase in the news reports about 30 countries, and China is ranked first in terms of the number of reports. Over the past decade, there has been a sharp decline in the AvgTone of US media about these countries, which dropped from +5.48 in 2008 to -1.22 in 2017. From 2015 to 2017, the AvgTone’s value remained negative, i.e. negative press coverage prevailed. Public opinion in this stage is defined as “critical”. Russia was the most criticized country then in the US media5, and China came third.

3.3 Trend in US Public Opinion

As can be seen from Figure 1, there has been a steady increase in the US in the media coverage of