Purchasing Protection? The Effect of Political Spending on U.S. Trade Policy

• DOI: 10.1177/106591290405700103
• Date: 01 March 2004
• Published date: 01 March 2004
• Author: Jeffrey M. Drope,Wendy L. Hansen
• Subject Matter: Articles

Purchasing Protection? The Effect of Political Spending
on U.S. Trade Policy
JEFFREY M. DROPE and WENDY L. HANSEN, UNIVERSITY OF NEW MEXICO
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 lobby-
ing activities and campaign contributions, we analyze the influence of domestic and foreign monies on bureau-
cratic decision making on trade policy.
The issue of whether or not money influences policy- regulatory agency with six politically appointed commis-
making has been widely debated in American poli-
sioners who make decisions, by majority vote, on the exis-
tics. While a direct link between money and policy
tence of injury to the U.S. industry by the alleged dumped
outcomes has proven difficult to make, bureaucratic deci-
imports. Affirmative decisions by both bodies result in the
sions on trade protection provide an opportunity to link
imposition of higher tariffs, as determined by the ITA, in
politically active firms and industries to policy outcomes. In
order to counter the alleged dumping. Also, prior to a deci-
recent decades, increased global competition has led U.S.
sion, a public hearing is held before the ITC on each peti-
f i rms and industries to seek protection from fore i g n
tion in which both domestic and foreign parties may pres-
imports. One popular statute, the U.S. Antidumping Law,
ent their case before the commission. Evidence suggests that
allows firms or industries to seek protection through the
both agencies are susceptible to external political pressure
U.S. bureaucracy from the alleged practice of dumping,
(Baldwin 1985; Hansen 1990; Hansen and Park 1995;
where dumping is defined as selling goods at below home
Hansen and Prusa 1996).
market price or cost of production. We seek to determine
Politically active firms and/or their associations may
the effect of domestic and foreign political spending on
influence trade policy decisions in at least two ways. First,
trade policy outcomes.
PAC contributions, soft money donations, and lobbying
By examining lobbying expenditures, soft money, and
could be used to affect policy indirectly through the legisla-
Political Action Committee (PAC) contributions of firms,
ture. For example, the principal-agent and congressional
industry associations, and other interested parties involved
dominance literatures as well as trade policy studies more
in a petition, we seek to determine whether or not such
specifically provide compelling evidence that members of
activities affect trade policy decisions. We are also interested
the House and Senate have a stake in bureaucratic decisions
in the role of foreign lobbying as a counter pressure to
and are active in influencing those decisions. In the case of
domestic interests. While it has been argued that foreign
trade policy, Senators and Representatives have attended
corporations are influential in U.S. politics (Choate 1990;
public hearings held by the ITC to express their positions in
Prestowitz 1988), very little systematic research has been
favor of protection for a firm or industry. Also, numerous
done on policy impacts.
hearings have been held in Congressional committees and
Decisions under U.S. Antidumping Law involve two
subcommittees regarding the decisionmaking of the ITC
bureaucratic agencies. The International Trade Administra-
and Commerce Department, and much legislation has been
tion (ITA), an executive agency in the Department of Com-
proposed and adopted, modifying the rules under which
merce, investigates dumping petitions and makes the deci-
these bureaucracies operate in order to increase the likeli-
sion on the unfair foreign practice of dumping. The
hood that certain firms or industries will receive trade pro-
International Trade Commission (ITC) is an independent
tection (e.g. see Hansen and Prusa 1996). Furthermore,
public records exist of the contributions that firms give to
specific congressional candidates, and firms must list in
their lobby disclosure reports whether or not they are lob-
NOTE: Wendy L. Hansen thanks the Joyce Foundation for providing
bying Congress directly and the reasons why. Thus a rea-
summer research support.
sonable link may exist between firms’ contributions and
Political Research Quarterly, Vol. 57, No. 1 (March 2004): pp. 27-37
lobbying efforts, and policy outcomes via Congress.
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POLITICAL RESEARCH QUARTERLY
Second, firms or industry associations may directly lobby
The remainder of this paper is organized as follows. We
the executive branch or the bureaucracy to affect policy out-
begin with a brief discussion of the prior research, followed
comes. Again, firms are supposed to disclose if and why
by a discussion of how it specifically relates to our theoreti-
they are lobbying the executive and/or specific bureaucra-
cal framework and research design. Next, we highlight the
cies. Political appointees in the Commerce Department ulti-
general characteristics of antidumping cases, and outline the
mately make decisions on unfair foreign practices. And ex-
model and measures that we use to test these theoretical
ITC commissioners (e.g. Paula Stern) have even become
propositions. Finally, we summarize the main findings and
lobbyists for firms seeking protection. As profit-maximizers,
the broader implications.
firms and industry associations may spend time and money
directly lobbying for favorable policy outcomes.
LITERATURE
In a case that neatly highlights the “politics” of
antidumping disputes, state and federal-level politicians
There is still no definitive winner in the lively debate that
spoke publicly to the media and testified at hearings con-
explores if and how political contributions influence policy-
cerning alleged steel dumping by Japan (ITC case 731-TA-
making making. The evidence for and against the notion
807). Representatives Regula and Murtha and Senators
that “money matters” continues to accumulate on both sides
Specter and Rockefeller testified before the ITC requesting
of the debate. Researchers have tended to focus on PAC con-
punitive duties against Japanese steel exporters, while Sen-
tributions in their search for a connection between money
ators Rockefeller, Byrd, and DeWine spoke out publicly to
and influence. Much of this research explores the concept of
the media in favor of protection (Rushford 2000). Notably,
“vote buying.” Taking a different theoretical approach,
among Senator Rockefeller’s largest campaign contributors
research exploring lobbying influence has sought to identify
were five of the petitioners in this and several other steel
causal mechanisms where analysts attempt to demonstrate
cases: Bethlehem Steel, USX, Geneva Steel, Weirton, and the
whether or not lobbying can increase access, and whether or
United Steelworkers of America. Additionally, at the time,
not access actually leads to influence.
the Senator was the third-ranking Democrat on the Senate
Much of the early quantitative work suggests and tests
Finance committee, which oversees the ITC. But politicians’
for causal links between political contributions—particu-
relationships with industry constituents are more than just
larly from PACs—and legislative results (Gopoian 1984;
campaign contributions—simple shared interests also dom-
Saltzman 1987). More recently, Smith (2000: 139-40) con-
inate their actions and interactions. While firms and indus-
curs that business “does exert some overt leverage over the
tries promote their own health ultimately for maximization
outcomes of unifying issues,” though he concludes that his
of profits, politicians care about the general welfare of their
empirical analysis suggests that this leverage is limited and
larger constituency because of the possibility of future sup-
that favorable public opinion and election outcomes are
port—either financial or more implicitly, in industries’
most important in determining legislative outcomes. Other
voting employees.
scholarly efforts have avoided attempts to establish direct
Shared interests happen on both sides of a policy debate.
links between contributions and legislative outcomes, and
In a somewhat similar scenario, a firm opposed to protec-
have instead sought to establish links between patterns of
tion was successful at securing a negative bureaucratic
giving and “access” to legislators. These approaches explore
policy decision. In a set of three rubber cases (USITC Inves-
the notion that “access” is positively related to influence
tigation numbers 731-TA-794, 731-TA-795, and 731-TA-
(e.g. Langbein 1986; Wright 1990).
796), Michelin North America, a U.S. subsidiary of a French
While scholars...