privatizing commercial diplomacy… 1 -...

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


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.


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.


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


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.


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


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


"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


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


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.


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


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).


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


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?


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


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.


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.


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.


Figure 2: Section 301 and Trade Barriers Regulation cases, 1985-2001

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301 casTBR cas


Figure 1: Frequency of Section 301 cases, 1975-2001

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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).


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


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.


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.


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.


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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

http://www.bea.doc.gov/


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.

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