Foreign Lobbying as a Strategy for the Negotiation of Free Trade Agreements

• In Event: The Global Governance of Trade

Abstract

Economic globalization has intensified the susceptibility of international actors to the policy decisions of major powers. Foreign governments, businesses, and interest groups have resorted to lobbying activities to promote trade with economically powerful states and obtain access to their markets. Foreign Agents Registration Act of 1938 has enabled foreign entities to legitimately intervene in the policy-making process of the United States by hiring American agents to lobby on behalf of them. As a hegemonic power with the largest market, the U.S. has been a recipient of prolific lobbying activities. From 1971 to 2017, foreign entities around the world have conducted more than 9,500 lobbying activities on trade issues toward the U.S. While the number of foreign lobbying in total has been declining gradually, the ratio of trade lobbying increased in the Post-Cold War era than in the Cold War era. However, it is puzzling that international actors still choose to engage in costly lobbying activities when trade liberalization has become a global norm, and when there are International Organizations to ensure commitment to free trade. While the World Trade Organization has contributed to the promotion of liberal trade at an unprecedentedly wide scale, the Organization has been stagnant since the Doha round. States are turning to Free Trade Agreements and regional trade institutions as an alternative, and this trend accounts for the persistence of foreign lobbying regarding trade. Foreign actors may participate in lobbying to affect the design of trade institutions.

In this paper, I examine whether the negotiation of Free Trade Agreements increases the demand for lobbying and thus intensifies the magnitude of foreign lobbying. As an international negotiation that involves a two-level game (Putnam 1988), successful Free Trade Agreements require the approval of chief negotiators and domestic constituents. Such entanglement of domestic and international politics in the negotiation process provides foreign actors with the incentive and opportunity to engage in lobbying activities. Lobbying allows foreign governments to approach not only the negotiators of Free Trade Agreements (Level I) but other governmental officials, politicians, and constituents who affect the American win-set but who do not sit at the negotiation table (Level II). Also, foreign firms and interest groups may carry out lobbying activities to appeal to relevant American actors directly. I argue that foreign lobbying can help foreign entities effectively attain their bargaining goals by facilitating bilateral information transactions. Foreign entities may transmit information to persuade American legislators, government officials, and the public through lobbying. At the same time, lobbying can be a channel to extract information from the American targets. More knowledge on the preferences of American actors will provide foreign entities greater leverage in the negotiation. Due to the two-level game embedded in the negotiation and establishment of Free Trade Agreements, I argue that the magnitude of lobbying will increase during the negotiation period of FTAs. Also, actors may have a higher incentive to lobby, when the interval between the signing and ratification of an FTA prolongs. My research also investigates if Free Trade Agreements similarly raise the lobbying incentive of foreign governmental and non-governmental actors.

To examine the association between Free Trade Agreements and the patterns of foreign lobbying in the context of the United States, I use an original dataset I compiled from the Department of Justice’s foreign lobbying reports between 1995 and 2017. I use the text of lobbying reports as data (using the text-mining package of R) to identify trade-related lobbying activities and to classify the lobbying incidents by the type of lobbying entities such as governmental/non-governmental actors. I find strong evidence that foreign actors significantly amplify the number of lobbying activities at the final stage of the negotiation and during the interval between the signature and activation of an FTA. Also, while foreign governmental entities are likely to change their lobbying patterns due to the influence of FTAs, foreign private entities are not. The results suggest that lobbying is a strategy that foreign actors, particularly governmental ones, tend to employ to affect the design and establishment of Free Trade Agreements to secure their interests. Also, the results reiterate that international institutions are not exogenously given, but are the byproducts of the interaction among diverse actors.

Author

• Dong Ju Lee, Musashi University