Plaintiffs by proxy: A firm-level approach to WTO dispute resolution

For example, factors such as intra-industry heterogeneity in competitiveness, factor mobility, industry size, diversification, and trade dependence have been argued to determine which industries have the most influence over public policy (Gilligan 1997; McGillivray 2004; Hillman et al. 2004).

Some scholars argue that the size of the economy affects involvement in disputes (Bown 2005; Guzman and Simmons 2005; Horn and Mavroidis 2011; Sattler and Bernauer 2011), and others focus on past experience (Davis and Bermeo 2009; Conti 2010), or exchange-rate regimes (Copelovitch and Pevehouse 2011; Broz and Werfel 2014; Bown and Reynolds 2015; Betz and Kerner 2016). While some developing countries have actively initiated WTO disputes, most do not, and empirical studies show that country-level factors such as weak legal capacity, lack of resources, or fear of retaliation deter developing countries from initiating disputes (Guzman and Simmons 2005; Bown 2005; Kim 2008; Busch et al. 2009; Elsig and Stucki 2012). Other studies investigate country-level factors affecting escalation of disputes (Busch and Reinhardt 2000, 2003), and Busch and Reinhardt (2006) and Johns and Pelc (2014) study the role of third-party states during dispute resolution. Other scholarship focuses on domestic politics. Chaudoin (2014) and Pervez (2015) argue that the timing of dispute initiation is driven by elections. The working assumption of all of these studies is that states are the relevant actors.

Formally, a principal-agent relationship exists whenever one actor, the principal, attempts to induce another actor to perform or comply. The agent must have an information advantage of some sort (for example, local knowledge, expertise, hidden effort, or private information about its type) to make the problem theoretically interesting.

Source: https://​ustr.​gov/​issue-areas/​enforcement.

A lobbying report provided by Airbus (see the Online Appendix Fig. A1) indicates that Airbus lobbied regarding civil aircraft issues, and in section 16 reports that specific lobbying issues are “matters pertaining to the US and European civil aviation industries.”

A selected list of law firms involved in WTO cases is in Bown (2010).

The country-level literature, for example has examined dispute outcomes (Busch and Reinhardt 2000; Reinhardt 2001; Bown 2004; Guzman and Simmons 2005).

For further information about the dataset, see Davis (2012), 123–32.

Davis (2012) considers only nine WTO members that have the highest trade volumes with the United States. These nine are Canada, EU, Japan, Korea, Mexico, Brazil, India, Malaysia, and Singapore. Note that China is one of the major trade partners of the United States, but it is excluded because it joined the WTO only in 2001.

Data available at http://​www.​opensecrets.​org.

Data available at http://​www.​oecd.​org/​sti/​ind/​stanstructuralan​alysisdatabase.​htm.

In addition, we analyze the effects of political contributions to the Republicans and the Democrats separately. The results are similar to those reported above, and we report them in the Online Appendix Table B2.

A description of the text analysis method used in the data collection and the list of involved firms can be found in the Online Appendix Section A.3.

Data available at http://​www.​opensecrets.​org.

Details on the methodology are available at http://​www.​opensecrets.​org/​lobby/​methodology.​php.

On the “new-new” trade theory, see Melitz (2003), Bernard et al. (2003), and Helpman et al. (2004), and Antràs and Helpman (2004).

Jensen et al. (2015) show that firms with more vertical FDI are less likely to file antidumping petitions, and we find that FDI is also associated with lower levels of lobbying during WTO disputes.

The results are robust to other model selections (pooling and random effects). A Hausman test indicates that fixed-effect models are appropriate.

Additional results in the Online Appendix show that a model that does not control for selection effects does exhibit a significant positive effect of a different variable, political contributions, on the probability of a pro-complainant ruling (Table B5), and this result survives in models that control for selection into WTO dispute initiation (Table B4) (We use industry-level political contributions data because the unit of analysis for the selection model is an industry-level trade barrier). However, the result of firm-level lobbying on panel rulings is insignificant when we model the selection problem as survival of a dispute until the panel rules.

It would appear natural to include lobbying data in the selection stage in models (3) and (4), we cannot do so because the data are not available. Since the consultation stage only lasts a few months and the lobbying data are collected annually, we cannot specify the amount of lobbying spent in the first stage.

We update the dataset because its coverage ends in 2010. We consider both legislative and presidential elections.

These results are consistent with the magnitudes observed in some well-known cases. In US-Softwood Lumber, the United States lumber industry spent on average $1.5 million to influence the International Trade Commission (ITC), which had investigated imports of softwood lumber from Canada and determined that Canadian imports were subsidized and sold in the United States at less than fair value. The Canadian government challenged this measure by initiating a dispute on 20 December 2002 at the WTO. The dispute took almost four years before it was resolved. In a case with higher stakes, US-Zeroing, several countries lodged a complaint against the United States for its use of “zeroing” methodology in its antidumping margin calculations. The WTO panel ruled that using zeroing is inconsistent with the Antidumping Agreement, but US industries spent on average $5.9 million per year on lobbying, and US compliance with the ruling was delayed for eight years.

Japanese steel producers related to this case are Nippon Steel, NKK Corp., Kawasaki Steel Corp., Kobe Steel Ltd., Sumitomo Metal Industries Ltd., and Nisshin Steel Co.

WTO Panel report WT/DS184/R.

New York Times article, “Clinton warns US will fight cheap imports.” Source: http://​www.​nytimes.​com/​1998/​11/​11/​business/​international-business-clinton-warns-us-will-fight-cheap-imports.​html.

House hearing in the 106 Congress to discuss steel trade issues, which is available at https://​www.​gpo.​gov/​fdsys/​pkg/​CHRG-106hhrg57306/​html/​CHRG-106hhrg57306.​htm.

New York times article, “New US guards promised against steel import surges.” Source: http://​www.​nytimes.​com/​2000/​07/​26/​business/​new-us-guards-promised-against-steel-import-surges.​html

WTO Panel report WT/DS184/R.

According to the Article XXI, prompt compliance with recommendations or rulings of the DSB is required in order to ensure effective resolution of disputes for the benefit of all members.

A recent status report is WT/DS184/15/Add.171 [accessed 12 April 2017].

“Japan-US steel dispute to be resolved by WTO,” Japan Times, July 18, 2000. www.​japantimes.​co.​jp/​news/​2000/​07/​18/​business/​japan-u-s-steel-dispute-to-be-resolved-by-wto/​.

Compared to imports during a period before the US imposed antidumping measures in 1998 (6.07 million), steel imports from Japan decreased to only 1.93 million tons in 2000 (Keisuke 2006).

Japanese steel producers also spend on lobbying, but the amount is relatively small. Sumitomo Metal Industries Ltd spent a mere $40,000 in 1999 and this amount decreased to $20,000 in 2002.