Purchasing Protection? the Effect of Political Spending on U.S. Trade Policy
Drope, Jeffrey M., Hansen, Wendy L., Political Research Quarterly
The issue of whether or not money influences policymaking has been widely debated in American politics. While a direct link between money and policy outcomes has proven difficult to make, bureaucratic decisions on trade protection provide an opportunity to link politically active firms and industries to policy outcomes. The U.S. International Trade Commission (ITC) and the U.S. Department of Commerce both play a major role in making trade policy by administering several important trade laws, including the U.S. antidumping law. Firms can petition the ITC and Commerce for protection from foreign firms that are alleged to engage in the unfair practice of dumping their goods on the U.S. market. Evidence suggests, however, that firms use this law as a means of seeking protection from foreign competition, even when that competition is fair. As the stakes are high for both domestic and foreign firms, there is the potential for political influence. Focusing on lobbying activities and campaign contributions, we analyze the influence of domestic and foreign monies on bureaucratic decision making on trade policy.
The issue of whether or not money influences policymaking has been widely debated in American politics. While a direct link between money and policy outcomes has proven difficult to make, bureaucratic decisions on trade protection provide an opportunity to link politically active firms and industries to policy outcomes. In recent decades, increased global competition has led U.S. firms and industries to seek protection from foreign imports. One popular statute, the U.S. Antidumping Law, allows firms or industries to seek protection through the U.S. bureaucracy from the alleged practice of dumping, where dumping is defined as selling goods at below home market price or cost of production. We seek to determine the effect of domestic and foreign political spending on trade policy outcomes.
By examining lobbying expenditures, soft money, and Political Action Committee (PAC) contributions of firms, industry associations, and other interested parties involved in a petition, we seek to determine whether or not such activities affect trade policy decisions. We are also interested in the role of foreign lobbying as a counter pressure to domestic interests. While it has been argued that foreign corporations are influential in U.S. politics (Choate 1990; Prestowitz 1988), very little systematic research has been done on policy impacts.
Decisions under U.S. Antidumping Law involve two bureaucratic agencies. The International Trade Administration (ITA), an executive agency in the Department of Commerce, investigates dumping petitions and makes the decision on the unfair foreign practice of dumping. The International Trade Commission (ITC) is an independent regulatory agency with six politically appointed commissioners who make decisions, by majority vote, on the existence of injury to the U.S. industry by the alleged dumped imports. Affirmative decisions by both bodies result in the imposition of higher tariffs, as determined by the ITA, in order to counter the alleged dumping. Also, prior to a decision, a public hearing is held before the ITC on each petition in which both domestic and foreign parties may present their case before the commission. Evidence suggests that both agencies are susceptible to external political pressure (Baldwin 1985; Hansen 1990; Hansen and Park 1995; Hansen and Prusa 1996).
Politically active firms and/or their associations may influence trade policy decisions in at least two ways. First, PAC contributions, soft money donations, and lobbying could be used to affect policy indirectly through the legislature. For example, the principal-agent and congressional dominance literatures as well as trade policy studies more specifically provide compelling evidence that members of the House and Senate have a stake in bureaucratic decisions and are active in influencing those decisions. In the case of trade policy, Senators and Representatives have attended public hearings held by the ITC to express their positions in favor of protection for a firm or industry. …