Foreign Lobbies and Us Trade Policy

44 Pages Posted: 13 Jan 2004

See all articles by Kishore Gawande

Kishore Gawande

University of Texas at Austin

Pravin Krishna

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Michael J. Robbins

Independent

Date Written: January 2004

Abstract

In popular discussion much has been made recently of the susceptibility of government policies to lobbying by foreigners. The general presumption has also been that such interactions have a deleterious effect on the home economy. However, it can be argued that, in a trade policy context, bending policy in a direction that would suit foreigners may not in fact be harmful: If the policy outcome absent any lobbying by foreigners is characterized by welfare-reducing trade barriers, lobbying by foreigners may result in reductions in such barriers and raise consumer surplus (and possibly improve welfare). Using a new data set on foreign political activity in the US, this paper investigates the relationship between trade protection and lobbying activity empirically. The approach taken in this paper is primarily a structural one. To model the role of foreign and domestic lobbies in determining trade policy, we develop first a theoretical framework building on the well-known work of Grossman and Helpman (1994); the econometric work that follows is very closely linked to the theory. Our analysis of the data suggests that foreign lobbying activity has significant impact on trade policy - and in the predicted direction: Tariffs and non-tariff barriers (NTBs) are both found to be negatively related with foreign lobbying activity. We consider also extended specifications in which we include a large number of additional explanatory variables that have been suggested in the literature as determinants of trade policy (but that emerge from outside of the theoretical structure described above) and confirm the robustness of our findings in this setting.

Suggested Citation

Gawande, Kishore and Krishna, Pravin and Robbins, Michael J., Foreign Lobbies and Us Trade Policy (January 2004). NBER Working Paper No. w10205. Available at SSRN: https://ssrn.com/abstract=486209

Kishore Gawande

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Pravin Krishna (Contact Author)

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael J. Robbins

Independent

No Address Available

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