Power and Compliance: The Case of US Trade Politics

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Power and ComplianceThe Case of US Trade
Politics

• Ha Lyong Jung
• (School of International Studies, Kyung Hee
  University)
• May 8, 2009

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• I. Question Power, Institutions, or Ideas?
• 1) Managerial approaches, which view
  noncompliance as stemming from ambiguities in
  treaties, insufficient state capacity, or
  shifting international and domestic environments
  (Chayes and Chayes 1993).
• 2) Selection bias In many cases agreements that
  are reached do not call for behavior that is much
  different from what states likely would have done
  anyway (Downs, Rocke, and Barsoom 1996). The set
  of signed agreements observed in international
  relations is not random, but rather is
  oversampled on the shallow end of the cooperation
  spectrum, which explains why we observe high
  rates of compliance in international agreements
  (Fortna 2004 von Stein 2005).
• The ultimate litmus test of cooperation and
  compliance theories occurs in situations where
  states interests are directly opposed (Mitchel
  and Hensel 2007).
• The US aggressive unilateralism to enhance market
  accessibility provides an idealistic experimental
  setting to examine competing influences of power,
  institutions, and ideas to enforce free trade.

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• II. Section 301 Trade Policy
• Since the early 1980s, the US abandoned the
  principle of the Bretton Woods system that seeks
  reciprocity based upon multilateral trade
  negotiations. This change in trade policy led to
  the US Congress passing the Omnibus Trade and
  Competition Act in 1988, creating the super and
  special variants of Section 301.
• Section 301 meant export politics pursued by
  exceptionally aggressive means. The new policy
  forces major trading partners of the US to adopt
  free and fair trade policy in bilateral
  economic negotiations.
• After determining unfair and unacceptable trade
  practices, the USTR demands unilateral trade
  concessions to rectify the practices with the
  initiation of a Section 301 investigation. The
  trading partners are supposed to implement
  concessions, while the USTR keeps a close eye on
  the removal of trade barriers as agreed.

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• III. How to enforce concessions?
• 1) Hegemonic Power and Concessions
• 2) Institutions and Ideas
• 3) Issue linkage and Further Concessions

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• IV. Empirical Analysis
• Dependent Variable The level of concession
• Table 1. Measurement of Agreement
• 5 An agreement with immediate actions or measures
  to eliminate designated practices.
• 4 An agreement committed to eliminate designated
  practices or target agreed to follow G/W
  ruling.  
• 3 No agreement reached but target country
  eliminated practices or lift off designated
  barriers before USTR terminated investigation.
• 2 No formal agreement reached but target country
  made offers or committed to lift off designated
  barriers or reduce barriers. Or target country
  agreed to continue the negotiation. Or target
  showed its intention to eliminate designated
  practices only after a GATT/WTO dispute panel
  ruled against the target's claim.
• 1 Neither concession nor promise offered.

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• Independent Variables variables to measure
  relative power, institutions, and ideas
• - National GDP (million dollars, 1995 constant
  value).
• - Trade balance of payments. Minus signs mean
  deficits for US from bilateral trade (million
  dollars of 1990 constant value).
• - Per capita GDP (hundred dollars of 1990
  constant value).
• - Ratio of exports to US to national GDP.
• - Change in terms of trade.
• - GDP Growth Rates at the year of initiation of
  Section 301 investigation.
• - (Arms transfers from the US to target) / GDP.
• - Arms transfers from the US to target) / Total
  arms trade.
• - no consultant 0 GATT/WTO Consultant 1
  Decision of dispute settlement panel for US 2.
• - Cases initiated after 1995 1 others 0.
• - Cases initiated after 1991 1 others 0.
• - Cases are about agriculture-related industry
  1 others 0.
• - Cases are about Intellectual property rights
  related industries 1 others 0.
• - Cases established by USTR's self-initiation
  1 others 0.
• - Import restrictions via tariffs or quotas 1
  others 0.

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• V. Findings
• 1) Model 1 exclusively considers the liberal
  perspective emphasizing the role of international
  institutions and reciprocal relationships for
  international cooperation.
• - The reciprocity, however, does not much
  contribute to friendly responses from targets by
  section 301. Neither balance of trade nor export
  dependence of targets to US market proved
  significant.
• - The GATT/WTO rules runs against obtaining
  concessions.
• 2) Model 2 exclusively takes power related
  variables into consideration for the explanation
  of reaching agreements.
• - Model 2 clearly shows that systemic power,
  measure by GDP, and the US political leverage
  over targets play central role for gaining
  economic concessions.

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• 3) Model 3 is to test the effects of power
  related variables after controlling for other
  influences.
• - Even after controlling for reciprocal and
  institutional effects upon agreements, the size
  of economy and political relationship
  consistently affect varying responses across
  targets. It seems apparent that the US gains
  concessions mainly from economically small and
  politically dependent states.
• 4) Model 4, the economy size is dropped and the
  reciprocity variable is included, which has been
  excluded from models 1 and 2 because of high
  correlation with GDP.
• - Model 4 reaffirms the positive influence of
  power and the conditional effects of institutions
  on realizing the US interests in the realm of
  international politics.

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• 5) Model 5 incorporates per capital GDP instead
  of GDP and balance of payments. Model 5 is to
  test whether trade openness will result in more
  openness despite aggressive US stances, at one
  hand, and to verify the importance of the linkage
  after considering the influence of trade
  openness.
• - As higher per capital GDP closely relates to
  higher level of trade openness, per capita GDP is
  expected to have positive effects on reaching
  friendly agreements. The positive coefficient of
  per capita GDP confirms this point.

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• IV. CONCLUSION
• Section 301 apparently forced most major US
  trading partners to come to the bargaining
  tables. While many targets had been forced to
  concede to the US demands, the level of
  concessions was not large enough to be
  satisfactory for the U.S. Despite explicit
  reliance upon power, in many cases, trade
  barriers continue. When the economic power of
  targeted states becomes larger, the chance of
  reaching concessive agreements becomes rarer. The
  gamut of trade policy changes by force has a
  clear limit.
• A successful linkage of the current trade issue
  with other political issues can boost the gains
  for the US. In other words, the U.S. can change
  the evaluation of economic losses to targets by
  exploiting their political weakness. One problem
  is that the effectiveness of issue linkages
  depends on specialized bilateral relationships
  between its trading partners and US.
• Somewhat dismal implications for international
  cooperation may be derived from those findings.
  Should the formation of a free trade regime has
  been forced to reluctant actors, the free trade
  regime can be fragile without the coercion of a
  hegemonic state.