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Privatizing Commercial Diplomacy… 1
Privatizing Commercial Diplomacy:
Institutional Innovation at the Domestic-International Frontier
Richard Sherman and Johan Eliasson Department of Political Science Maxwell School of Citizenship and Public Affairs Syracuse University Syracuse, NY 13244-1090 USA [email protected] [email protected] http://maxwell.syr.edu/maxpages/faculty/sherman
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Privatizing Commercial Diplomacy: Institutional Innovation at the Domestic-International Frontier Richard Sherman and Johan Eliasson Abstract In the United States and the European Union, important aspects of commercial diplomacy are undergoing a gradual process of privatization. New institutional arrangements permit private groups (predominantly industry associations and firms) to petition for the initiation of trade disputes, propose agenda items for multilateral negotiations in the World Trade Organization, and even conduct negotiations on regulatory reform outside the customary state-to-state channels. These institutional innovations—the United States' Section 301, the European Union's Trade Barriers Regulation, formal and informal consultation processes surrounding WTO negotiations, and the Trans-Atlantic Business Dialogue—are not neutral in the domestic-level competition over protection and free trade. They are mechanisms that empower exporters alone, and not all equally. While reshaping the international politics of trade policy, the movement toward privatizing commercial diplomacy raises questions about states' allocation of influence among competing interest groups, industries, and social classes. We examine these institutional developments, focusing on their origins, their pattern of use by broad industry classification, transatlantic comparisons concerning their implementation, and issues of representation and sustainability.
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In the United States and the European Union, important aspects of commercial
diplomacy are undergoing a gradual process of privatization. The story of "privatized"
diplomacy begins with Section 301 of the US Trade Act of 1974, which provided a
mechanism for private parties to petition the executive branch for the initiation of
negotiations intended to reduce foreign barriers to US exports. While Section 301 was
initially easy to dismiss as a mere outward projection of American protectionism, it has
since served as a model for European mirror legislation in the form of the Trade Barriers
Regulation (TBR), through which private parties can petition the European Commission
to initiate negotiations with foreign states over barriers to European Union (EU) exports.
Along with these developments, the Transatlantic Business Dialogue (TABD) has
emerged as a forum for private (company-to-company) negotiations on proposals for
trade-related regulatory reform that are submitted jointly to the governments of the
United States and the European Union. Section 301 and the TBR provide private parties
with access to the standard (state-to-state) diplomatic channels, while firms participating
in the TABD not only initiate but also carry out negotiations.
These institutional developments are worthy of study for a number of reasons. First,
while industry influence on trade policy is far from novel, institutionalized access of this
type is a relatively new and evidently growing phenomenon. Firms and industry
associations in many states have long had access to petition processes for "defensive"
(protectionist) measures such as anti-dumping, countervailing duties, and safeguards, but
the US and European petition processes under Section 301 and the TBR give industries
access to "offensive," market-opening measures, putting the state in the role of an actual
(versus merely figurative) agent of sectoral interests.
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Second, the European and American experiences of "privatized" diplomacy are
different in a number of interesting respects, not least in the greater frequency of use of
301 versus the TBR, and it is worth exploring the origins of these differences. Third,
cases under 301 and the TBR are carried out in the shadow of, and frequently within, the
dispute settlement procedures of the World Trade Organization (WTO). In this respect
the two policy measures exhibit a richer and differently sequenced set of political
interactions than those customarily treated in the theoretical literature on two-level
games. There, heads of state initiate agreements, legislatures exercise ratification power,
and interest groups, when they appear at all, serve to advise the legislature on its
ratification decision. In 301 and the TBR, following a broad legislative delegation of
authority to an administrative agency (the US Trade Representative in the US, the
Directorate-General for Trade in the EU), interest groups petition for initiation of
negotiations, administrative agencies undertake negotiations without need for legislative
ratification, and in many cases the rival claims of the relevant states end up being
adjudicated by an international institution.
Finally, there are some normative issues to raise about privatized diplomacy, above
and beyond the claims of "aggressive unilateralism" and camouflaged protectionism
leveled, not unjustly, at Section 301 (Bhagwati 1990). Watchdog groups suspicious of
industry influence have reviled the TABD as a subversion of democracy (Ralph Nader's
group Public Citizen, with characteristic subtlety, has labeled it the "Tricky Alliance of
Business Dictators"). Hysteria aside, it seems hardly likely that an organization
composed of chief executive officers of multinational corporations would act in the
public interest except by coincidence. There is reason then to ask how influential this
Privatizing Commercial Diplomacy… 5
group has been and is likely to become, and to explore countervailing tendencies that
might offer a similarly institutionalized means of interest-articulation to interest groups
other than business.
The Impetus For Section 301, the TBR, and the TABD
Few myths are as powerful in political economy as the story of domestic
perseverance in the face of foreign guile. To say that this myth was exploited by business
interests in America in the 1970s overstates the case, since in the first instance the notion
was sufficiently embedded in popular consciousness to render needless an ideological
push by business, and in the second the political pressure for protection came more
loudly and clearly from the Democratic party and organized labor than from Republicans
and organized industry. One result was Section 301 of the 1974 Trade Act, which
authorized "any interested party" (in practice, firms and industry associations) to lodge
complaints with the Special Representative for Trade Negotiations (now US Trade
Representative) against "unjustifiable or unreasonable" barriers to US exports. The
provision called on the Special Representative to initiate negotiations with foreign states
to seek the elimination of such barriers, and it fortified the negotiations with threats of
tariffs or other retaliatory trade barriers. The 1984 Trade and Tariff Act amended the
provision to allow the US Trade Representative to undertake investigations on its own
initiative. Amendments in 1988 brought about the so-called "Super 301" provision,which
called upon the Trade Representative to develop a priority list of countries that were
effectively put on warning of impending formal Section 301 action.
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Since its inception, Section 301 has been the basis for some 120 complaints against
foreign governments ranging from Guatemala to the European Union and from South
Africa to Canada. Issues covered in the disputes range from quotas and subsidies to
discriminatory taxation and intellectual property protection, and the industries in question
cover a diverse group including, e.g., textiles, sattelite-launching services, bananas, and
pharmaceuticals.
The EU's Trade Barriers Regulation began as the New Commercial Policy
Instrument, implemented in 1984. Interviews with European Commission officials
responsible for the drafting of the regulation make clear that Section 301 was the impetus
for the Commercial Policy Instrument, a variety of policy mimicry that is of interest to
the growing literature on policy diffusioni. The CPI was little used (only four cases were
initiated while it was in effect) and in 1994 the measure was redrafted with minor
changes as the Trade Barriers Regulation. Since that time there have been 20 TBR cases,
again with a diverse range of target states, including (e.g.) Korea, Argentina, Japan, and
the United States, and a range of policy measures including subsidization, anti-dumping
rules, copyright protection, and discriminatory taxation. Industries covered include, e.g.,
cosmetics, wine and distilled spirits, musical recordings, and shipbuilding.
Concomitant with the evolution of 301 and TBR, the US and the EU have taken
several joint steps to ease international trade restrictions and improve bilateral political
and economic cooperation. The 1990 Transatlantic Declaration laid down principles for
cooperation and consultation on trade liberalization and competition policy. In 1995 the
New Transatlantic Agenda (NTA) included a chapter on “Building Bridges Across the
Atlantic”, addressing general and specific means of liberalizing trade. In 1998 the
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Transatlantic Economic Partnership (TEP) was established as an extension of the NTA.
One purpose of the TEP is to tackle technical barriers to bilateral trade and “improve the
effective access to the regulatory procedures of public authorities by private interests”.
Another is to stimulate multilateral trade liberalization by joining forces on international
trade issues, strengthening the modalities of WTO dispute settlement procedures as well
as international adherence to WTO rulings.ii These and other similar bilateral initiatives
are signs of conspicuous willingness on behalf of the US government and the EU to work
with the private sector, thus providing the opportunity for private sector interests to be
heard and in turn influence trade regulations.
The TABD emerged as part of the NTA. More specifically it was the result of an
effort by the late US Commerce Secretary Ronald Brown to initiate regular meetings of
chief executive officers of American and European corporations to discuss trade-related
issues including regulatory reform. The TABD began meeting in 1995 and holds annual
meetings along with ongoing activities of working groups organized by sector and policy
area. The TABD annually presents a list of "deliverables" to the EU and the American
government outlining its demands for policy changes. Much of the TABD's activity has
concerned efforts to promote mutual recognition of product standards, though it also
issues exhortatory calls for trade liberalization of a general nature, as well as proposals
for dispute resolution (discussed below).
Experience of 301, TBR, TABD
Of these three institutional mechanisms, Section 301 has the longest history and the
most substantial track record. Though reviled by free-traders such as Bhagwati (1990) as
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"aggressive unilateralism," the measure has been viewed more favorably by Hudec
(1990), who considers it a type of "civil disobedience" within the poorly functioning
GATT dispute-settlement system. Ryan (1995) echoes this view by pointing out that the
implementation of Section 301 in the Pacific region has largely worked in support of
GATT (now WTO) rules.
While early Section 301 cases largely followed the "aggressive unilateralism" model,
with negotiations conducted bilaterally outside of the GATT system, nearly all of the 301
cases since the mid-1980s have come under the GATT/WTO dispute-settlement
framework, if only at the consultation level. The measure has, with some exceptions,
become a de facto route for private interests to request initiation of proceedings under the
GATT/WTO dispute-settlement system. Both Section 301 and the TBR in principle
permit cases that do not allege violation of an international treaty obligation, but in
practice the cases invariably (in the case of the TBR) or ordinarily (in the case of Section
301) cite specific treaty provisions as their basis in law. Thirty-two of the one-hundred
twenty Section 301 cases have ended up as formal disputes before the GATT/WTO,
compared to nine of the twenty TBR cases.
Research on the political-economic determinants of Section 301 cases has concluded
that countries enjoying large trade surpluses with the United States are more likely to be
targeted (Noland 1996), that countries with higher average tariffs are more frequent
targets (Noland 1997) and that democratic states are more likely than non-democracies to
be targets (Sherman 2001). Elliott and Richardson (1997) find that "successful"
outcomes in Section 301 cases (those resulting in greater concessions from the target
state) are more likely in countries with high trade dependence on the US and with large
Privatizing Commercial Diplomacy… 9
bilateral trade surpluses; they also find that cases targeting border measures (such as
tariffs or quotas) have more successful outcomes than those involving non-border
measures (such as competition policy or intellectual-property protection). No
comparable research has been done on determinants of selection of targets or of outcomes
of TBR cases.
One objective of the research from which this paper is draw is to conduct a
comparative quantitative study of industry-by-industry variation in the pattern of use of
Section 301 and the TBR. The aim is to get at questions similar to those posed in the
large literature on anti-dumping decisions: what effects do patterns in (e.g.) employment,
output, industry size, and industry concentration have on resort to the two policy
measures? Much is now known about the determinants of industry's resort to protective
measures, but there is no comparable quantitative analysis of industry-level variation in
resort to the market-opening mechanisms of what we term privatized diplomacy.
Figure 1 presents a graph of the frequency of Section 301 measures by year.
Amendments to the law in 1984 authorized the US Trade Representative to "self-initiate"
cases without a petition by a private party. These cases are also noted in the figure.
Figure 2 charts the frequency of both Section 301 and TBR cases during the period when
both have been in effect (including the years before the TBR replaced the Commercial
Policy Instrument). The number of cases under both provisions has been nearly equal
since 1996, when cases began to be filed under the TBR.
US-European Differences: 301 vs. TBR and Implementation of TABD Proposals
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While Section 301 and the TBR share many similarities, some important differences
result from the intergovernmental nature of the EU. European firms and industries have
avenues for exerting influence with their national governments as well as in Brussels. As
Cowles (2001) notes, the "Europeanization" of business-government relations is a
relatively new phenomenon, with lobbying groups becoming particularly active in
Brussels only toward the end of the 1980s. Unlike many traditional ties between
member-state governments and businesses seeking market access abroad, the TBR is a
formal bureaucratic process carried out in the European Commission. The availability of
two tracks for industry to pursue––one at the member-state level and one at the EU level–
–influences both the frequency of TBR cases and the substantive legal content of the
cases that emerge.
The costs to a firm or industry association of filing a TBR case are near zero––as a
Commission official pointed out during an interview, the process does not require a
petitioner to employ legal counsel or to deploy any other specialized expertise; the
Commission conducts its own research on the case and hence is not heavily reliant on
economic or legal information provided by the petitioner. Still, Commission officials
express some surprise that the TBR is not used more frequently. One result of the
traditionally close ties between business and member-state governments is that the "easy"
cases––those involving relatively clear violations of treaty obligations by a foreign state–
–bypass the TBR process altogether, going through national governments to the Council
of Ministers. TBR cases are in consequence frequently concerned with areas of trade law
that are less well-governed by precedent.
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A degree of bureaucratic institution-building may be at work in the Commission's
desire to see the TBR used more widely. Lobbying of member states by business, when
successful, ordinarily bypasses the Commission and results in a decision taken in the
Council of Ministers. The TBR can be viewed as a means of replacing this political
processes with a bureaucratic one, enhancing the role of the Commission both in internal
relations with interest groups and external relations with foreign states. Though the
Commission it has authority to decline to proceed with cases following a petition, no case
has been formally declined. In contrast, USTR declines to initiate investigations on
nearly 10 % of Section 301 petitions.
Interviews with European business representatives, perhaps unsurprisingly, depict a
view of the TBR not altogether consistent with that held by Commission officials.
Business representatives describe the TBR as a cumbersome instrument, requiring the
transmission of volumes of sensitive information to DG-Trade and opening the door to
repeated and open-ended requests for additional data. Firm-level data entrusted to DG-
Trade in the context of a TBR investigation, according to some interviewees, is at risk of
ending up in the hands of regulatory authorities—notably, DG-Competition—where it
could be used to bring actions against the firms who provide it. Justifiable or otherwise,
these concerns on the part of industry may account for some of DG-Trade's failure to turn
the TBR into the instrument of first resort for firms facing trade barriers in foreign
markets.
TABD officials and European Commission officials involved in the TABD process
note that the different administrative structures in the US and the EU lead to differences
in implementation of TABD proposals for regulatory reform. As agencies of an
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intergovernmental organization, European bureaucracies are accustomed to working both
within and between states, and coordination among agencies across the various
Directorates-General means that regulations are vetted by the segments of the
bureaucracy responsible for relations with third states. American administrative
agencies, in contrast, have no international "mandate;" their authorizing legislation
generally contains no provision for international coordination. One consequence is that
the Mutual Recognition Agreement (MRA), championed by the TABD and concluded
between the US and the EU has met with swifter implementation on the EU side. While
an outward- (indeed, upward-) looking bureaucracy such as the Federal Aviation
Administration is accustomed to certifying the airworthiness of imported aviation
equipment on a bilateral (country-to-country) basis, the inward-oriented Occupational
Health and Safety Administration reviews applications for certification of foreign testing
laboratories on a facility-by-facility basis.
Some Initial Findings
A discussion of EU-U.S.transatlantic dispute resolution mechanisms and private
initiatives need to be put in context of the extensive transatlantic economic relationship.
The EU and US together account for over half of global GDP and 40% of total trade.
Looking bilaterally, 20% of all EU imports are from the U.S. and 24% of all EU exports
head across the Atlantic; corresponding figures for the U.S. are 18% and 23%. 61% of all
FDI into the EU is American, 51% of FDI into the US stems from the EU, and 61% of all
direct investment in US stock comes from the EU (Eurostat, 2002; U.S. Doc BEA, 2002;
World Bank, 2003; U.S. Census Bureau, 2003).
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Given the level of EU-US trade interdependence and bilateral public and private
sector initiatives to address, and redress, obstacles to trade, it could perhaps be expected
that more disputes would be settled bilaterally.iii Surprisingly, fewer than half of all 301
disputes against the EU resulted in an USTR termination following a negotiated
settlement; 9 cases ended in retaliatory U.S. sanctions, while 10 disputes are still ongoing
(as of June 2003). The cases of retaliation all include food products, one of the smallest
industry groups of EU exports and imports,iv (see table 3).v The ongoing cases are
largely concerned with non-border trade violations, chiefly antidumping. (see table 1).vii
We found that companies in industrial sectors with the largest Foreign Direct
Investment (FDI) in the U.S. (Machinery and Vehicles accounting for roughly 40% and
Chemical products, another 15%) are amongst the least likely to be subject to 301/TBR
investigations. There are several possible explanations. The largest industrial sectors were
involved in early trade disputes which created precedents, meaning there are establishing
guidelines and sector specific knowledge of acceptable practices. At the same time the
food and beverage sector is one of the smallest sectors of EU-U.S. trade, these industries
are least likely to have companies subjected to antidumping investigations, while
Machinery and Equipment, Motor Vehicles and Steel and Metal products, the largest
groups of FDI into the US, dominate anti-dumping investigations (60% of all
antidumping cases, 70 % of all cases involving the EU,and 59 % of all cases against
Japan),ix indicating that these industries use non-trade barriers to gain or protect market
shares. So why are food and beverage products most disputed, and why is the EU the
most targeted (with Japan a close second)? The explanation is largely the opposite of that
for the largest industrial sectors; there are few precedents, more diverse products, and the
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EU has had high tariffs on food products from non-EFTA states, including the U.S.;
lending support to Nolan’s (1996) findings (see above). Furthermore, as Elliott and
Richardson (1997) show, industries with border measures such as tariffs and quotas (such
as food) are more likely to be targeted, and targeted successfully (for the plaintiff).xi The
EU also has large trade surpluses with the US (as does Japan) and consists of stable
democracies, supporting for Nolan (1997) and Sherman’s (2001) previous findings.xii
The number of investigations under the TBR (table 53) is, as noted small, but there
are some interesting findings within these cases. Even here food and beverage products
dominate relative to their proportion of trade, being the subject of 6 out 20 investigations.
Only 3 cases involve the largest industrial sectors, (see above), and half of TBR cases
concern countries in South America, five disputes are with the US and four with other
Asian countries.xiv (NEEDS ADDITIONAL DISCUSSION and RESULTS).
Theoretical and normative considerations
Moravcik (1997) depicts states as agents of influential groups in society; international
politics is the interplay of these groups' preferences as represented by states. Section 301
and the TBR are interesting in part because they are real embodiments of this theoretical
idea: the US and EU are, in this context, providers of diplomatic services to industry.
And, while the TABD clearly lacks the "dictatorial" powers ascribed to it by critics, the
group does internationalize and routinize one aspect of industry's influence over
regulatory politics. At the theoretical level, how should we understand an international
politics of trade in which states institutionalize channels for industry influence?
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As in any situation of agency, the first consideration is the nature of the principal-
agent relationship. The information asymmetry customary in principal-agent problems––
typically, an uninformed principal and an informed agent––are somewhat more complex
here. Industry is better-informed than government about its difficulties making sales in
specific foreign markets, but government is presumably better-informed than industry
about the provisions of international trade agreements.xv In order to gain attention and
stimulate action from government, industry has incentives to overstate the protectionist
effect of foreign states' trade practices, just as in anti-dumping cases it has incentives to
overstate the extent of injury.
To maintain a clientele among industry, the administrative agencies charged with
responding to petitions in 301 and TBR cases have incentives to achieve results; on the
other hand they maintain multifaceted trade relationships with foreign governments that
may work at odds with the objectives of a specific claim by industry. The information
and incentive problems generate the two principal dilemmas of privatized diplomacy:
first, government's reliance on information from an interested party (industry), and
second, the "unpackaging" of broader multi-issue and multi-country trade relationships
into case-by-case interactions. Unlike multilateral negotiating rounds, such case-by-case
interactions do not permit tradeoffs of concessions across sectors as a means to
"compensate" foreign governments for policy changes that assign costs to particular
interest groups (cf. Benz and Eberlein, 1998).
The addition of a “supervisor role” for the TABD helps us better understand the
relationship. In the economic public administration literature it is recognized that the
principal, to enhance control over the agent’s actions, may engage a supervisor whose
Privatizing Commercial Diplomacy… 16
role is to gather information about the agents’ activities for the principle (cf. Alchian and
Demsetz, 1972; Tallberg, 2000). The TABD can be viewed as serving a monitoring
function; of course as either supervisor or principal is has no mechanism to ensure that its
state “agents” perform as desired.
The TABD has presented the EU and the US administration with several other
initiatives to prevent trade disputes, as well as concrete proposals on how to solve
potential conflicts (TABDb, 2002, p.7-9.). Some of these initiatives, such as as the
TABD’s Guidelines on Regulatory Co-operation, have been adopted by the US and EU
(TABDa, 2002), while others are being examined (e.g. an “Early Warning System”). Yet
in the case of the TABD, the problem of relying on information from an interested party
is particularly acute. In the nightmare scenario of anti-globalization groups such as
Public Citizen, the TABD process gives regulated industries a chance to free themselves
of regulations that work in the public interest but at a cost to profits. This rather grandly
overestimates the TABD's influence, since even the relatively low-hanging fruit
represented by the Mutual Recognition Agreement has not been fully implemented.
When asked about the TABD's achievements in the regulatory area, both TABD officials
and European Commission officials begin with general statements of the group's
importance; as practical evidence, however, they offer only the Mutual Recognition
Agreement and an indefinite postponement of the EU's proposed metric-only labelling
requirement. On this basis it may be that consumers have little to fear from the TABD.
Still, the critics of the TABD process are not without reason in asking whether
institutionalized industry initiative in regulatory coordination is a case of the cart going
before the horse.
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A consideration to be borne in mind is that the opposite of institutionalized industry
influence on government is not generally the absence of industry influence, but rather the
exercise of informal, and hence less observable, influence. The emerging mechanisms of
privatized commercial diplomacy are valuable in part because they entail procedural
formalities including the generation of a documentary "trail." As one Commission
official said of the TABD, "They don't say anything to us that doesn't go in their report,
and we don't say anything to them that doesn't go in our report." This is something of an
overstatement; government officials attend TABD meetings, but Commission officials
insist that they are there only as observers. Section 301 and the TBR both result in public
reports summarizing their findings and actions. Shining some light on actions taken by
government in the field of trade policy is potentially valuable in its own right.
Some limits, and some of the promise, of privatized commercial diplomacy will serve
to conclude this brief review of issues. The TABD would appear to have naturally built–
in limitations on its potential reach. As a cross-sectoral and trans-Atlantic industry
lobbying group, the range of its opportunities for consensus within the group are
significantly smaller than in, say, a national industry confederation or a single-sector
industry association. What states are able to do––assign benefits and costs across
industries, with policy choices in which some industries win and others lose––the TABD
itself is institutionally constrained from doing. The group also looks unlikely to develop
the institutional continuity that would be required if it were to significantly raise its level
of effectiveness. For six months in 2002 the group went without a chairperson on either
the European or the American side, and for more than a year its working group on dispute
settlement has lacked an American director.
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The petition processes for the initiation of trade disputes in Section 301 and the TBR
have not lived up to the dire predictions of 301's greatest detractors. They are susceptible
to abuse, surely, but they have hardly led to an unraveling of the rules-based multilateral
trading system, and in some respects they support it. As 301 cases and TBR cases have
become closely allied with the GATT/WTO's rules and partly joined to its dispute-
settlement machinery, the measures have come to resemble less "aggressive
unilateralism" and more a simple adjunct to the normal dispute process. Since cases
frequently involve gray areas of the law, the measures are also potentially useful in
uncovering areas where the WTO system is in need of clearer specification of
obligations.
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Figure 2: Section 301 and Trade Barriers Regulation cases, 1985-2001
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Figure 1: Frequency of Section 301 cases, 1975-2001
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Privatizing Commercial Diplomacy… 21
Outcome in cases pursued by the EU under its Trade Barriers Regulation decision| Freq. Percent Cum. ----------------------------------------------- Affirmative | 4 17.39 17.39 Terminated| 10 43.48 60.87 Suspended | 6 26.09 86.96 Ongoing | 3 13.04 100.00 ----------------------------------------------- Total | 23 100.00
Outcome in Cases Pursued by the EU under its Trade Barriers Regulation (N23)
Ongoing Affirmative13% 17%
AffirmativeTerminated
Suspended Suspended
26% Ongoing
Terminated44%
8 of 23 Cases 1996-2002 were taken to the WTO. 1 case resulted in an affirmative (in favor of the EU) 5 cases were terminated and settled to the satisfaction of the EU (2 with the U.S.A.) 2 are ongoing (with Japan and Korea).
Privatizing Commercial Diplomacy… 22
Figure 1* Outcome of Cases Pursued under U.S. article 301(N=120)
Withdrawn complaint
WTO ruling in favor of Accused country found
4% the U.S.
in conformity with WTO 14%regulations
2% Ongoing
15%
USTR Terminated after a satisfactory settlement Retaliatory sanctions
with the accused imposed and STR country. investigation terminated
54% 11%
*Total is 96%. 1% of cases resulted in WTO rulings against the U.S. and 3% of cases were withdrawn by the USTR or settled with the accused country after the case was referred to theWTO
Privatizing Commercial Diplomacy… 23
Figure 2 Outcome cases under the EU's TBR (N=20) up through 2001.*
Ongoing investigation, 4, 20% WTO ruling in favor of the
EU(4 ), 20%
EU terminated the investigation after referral to the WTO (3) , 15%
EU terminated the investigation (9), 45%
* 7 /20 cases concern food and beverages (none with favorable WTO rulings), 3 cases involve textiles, 10 other industries.
Privatizing Commercial Diplomacy… 24
Figure 4. 301 Cases Pursued against the European Union (N=43)
Industry (grouped) Dispute settlement Iron
& Steel
Other Patents, Property etc
Transportation, Storage etc
Food & Beverages
Total
Affirmative WTO ruling 0 1 0 0 3 4 Negotiated but ongoing dispute 0 0 0 0 1 1 Ongoing dispute 0 2 0 0 8 10 Retaliatory tariffs imposed 6 1 0 0 2 9 USTR terminated investigation 0 1 2 3 9 15 USTR terminated investigation after referral to the WTO
1 0 0 0 3 3
Total 7 5 2 4 25 43 Chi-square pr. 0.011 between industry and dispute outcome
**While the number of cases pursued under section 301 up through 2002 is 120, several investigations affect more than one product but have been pursued under the same case number. There are also instances where investigations involve only one product but several countries (a "block" investigation) under the same case number.
Privatizing Commercial Diplomacy… 25
Figure 3 Figure 301 Cases pursued against the EU by industry (N=43)**
18
17/9* 16
14
12
10
8(3) 8
6 6
44 3
2 22 1
0 00 Iron and Steel products Other Patents, Property Transport, Food and Beverages
etc Storage etc
Referred to the WTO Settled without WTO involvement Referred to the WTO Settled without WTO involvement ( )= WTO ruling in favor of the U.S. ( )= WTO ruling in favor of the U.S. * Satisfactory settlement reached and investigation terminated. * Satisfactory settlement reached and investigation terminated. **While the number of cases pursued under section 301 up through 2002 is 120, several investigations affect more than one product but have been pursued under the same case number. There are also instances where investigations involve only one product but several countries (a "block" investigation) under the same case number.
**While the number of cases pursued under section 301 up through 2002 is 120, several investigations affect more than one product but have been pursued under the same case number. There are also instances where investigations involve only one product but several countries (a "block" investigation) under the same case number.
Privatizing Commercial Diplomacy… 27
References
Bayard, T. O. and K. A. Elliott (1994), ‘Reciprocity and Retaliation in US Trade Policy’,
(Washington, DC: Institute for International Economics).
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iSee, e.g., Mitchell A. Orenstein, “Mapping the Diffusion of Pension Reform,” in Robert Holzmann,
Mitchell Orenstein, and Michal Rutkowski, eds., Pension Reform in Europe: Process and Progress (Washington, DC: World Bank, 2003) pp. 171-194.
ii See The EU’s Relations with the United States of America p.2-4, 6-7 At
http://europa.eu.int/comm/external_relations/us/intro Accessed on April 12, 2003.
iii A general summary of all section 301 cases have been terminated by the USTR; two-thirds of all
investigations involving countries in Asia (except Japan) have led to USTR terminations, with the same
figure for cases with South America countries. Most disputes were resolved in bilateral negotiations where
a satisfactory outcome was negotiated, yet even after a dispute was referred to the WTO a negotiated
settlement was reached in a third of all cases.
iv Food and Beverages accounted for 9% of exports in 1985 and 5.5% in 2000, and 8.8% of imports in
1985 and 5.4% in 1999. During the same time period Machinery and Motor Vehicles accounted for 42.2%
and 46.6% of exports and 29.9% and 38.1% of imports, by far the largest industrial sector (EU, 2002:
U.S.ITC, 2002).
v For both the 301 and TBR cases we grouped countries based on geographical regions, with the
exception of Asia where Japan was left as a separate country. This was justified based on its share of world
GDP and trade, the frequently used trichotomous comparison EU-US-Japan, and the focus of this study,
transatlantic relations where leaving keeping Japan separate from other Asian economies provides a better
representation of the size of EU-US economic ties but also frequency of 301 and TBR cases involving the
three largest countries/regions.
vii For both the 301 and TBR cases we grouped countries based on geographical regions, with the
exception of Asia where Japan was left as a separate country. This was justified based on its share of world
GDP and trade, the frequently used trichotomous comparison EU-US-Japan, and the focus of this study,
transatlantic relations where leaving keeping Japan separate from other Asian economies provides a better
Privatizing Commercial Diplomacy… 30
representation of the size of EU-US economic ties but also frequency of 301 and TBR cases involving the
three largest countries/regions.
ix Data collected by ?????using data from the USITC and USITA, data available from authors. Statistically significant at the .001 level (N=895) . Slource, US Census Bureau (2002) (EU 2001) xi The relationship between industry and 301 investigations is statistically significant at 0.05 the level. xii US trade deficits (goods and services) with the EU and Japan in 2000 amount to 36 and 72 Bn USD respectively, and trade deficits have been substantial since the mid-1980’s. see US Census Bureau (2003) and US International Trade Commission , (2003)_. xiv The N is too small for statistical analysis.
xv It is also noteworthy that there are increasing similarities in EU and U.S. intra-legislative structures, e.g. neither states in the U.S. nor members of the EU can sign exclusive trade agreements, and they have one voice in negotiating international agreements (the USTR and the Commission.