Mischiefs of Faction: The Political Economy of Voluntary Export Restraints for Selected U.S. Industries, 1969 to 1989
CitationBenson, Mark Eric. 2011. Mischiefs of Faction: The Political Economy of Voluntary Export Restraints for Selected U.S. Industries, 1969 to 1989. Master's thesis, Harvard University, Extension School.
AbstractThis thesis examines why U.S. manufacturing industries received trade protection from federal elected officials in the form of Voluntary Export Restraints between 1969 and 1989. Three reasons emerged from political economy theory: factor specificity, collective action, and the role that key constituencies play in electing officials who adopt a policy of trade protection. After outlining the theory behind the three reasons, eleven case studies were examined. The case studies were focused on four of the five industries for which Voluntary Export Restraints were negotiated in the post World War II era in America, specifically, steel, shoes, televisions and autos. In each of these industries, a labor-management political coalition consistent with the Ricardo-Viner model lobbied for trade protection.
The viewpoint that actuated the labor-management political coalitions in the eleven case studies was more developed that a simple plea for trade protection. When a political coalition filed a petition with the U.S. Trade Commission, the political coalition alleged that there was an injury to the industry seeking protection pursuant to the Escape Clause of Section 201 of the Trade Act of 1974. This was true for the labor-management coalitions who pressed for the Ford specialty steel quotas, the Carter OMAs for shoes and televisions, the Reagan steel quota in 1984 and the Bush steel quota in 1989. Additional views actuating the political coalitions in each of the eleven cases were made known to the federal elected officials who were asked to adopt trade protection policy. In the steel cases and the two auto cases, the labor-management political coalition was also actuated by a critique of foreign government subsidies given to trading partners. In the Reagan steel quota decision of 1982 and the two auto cases, the additional view actuating the labor-management political coalition was the idea that a strong dollar made foreign goods expressed in foreign currencies cheaper than U.S. manufactured goods.
Presidential election victories sometimes followed when Presidents selected trade protection to benefit a key political constituency. Nixon's reelection in 1972 was helped by the steel workers decision to sit out the election, and Ford appears to have won the Republican Primary in Ohio in 1976 on the basis of his decision to implement specialty steel quotas. Election success appears to be the result of Reagan's auto quota of 1981, the steel quotas Reagan negotiated in 1982 and the Bush steel quota in 1989.
Other themes that emerged in the cases included Quota Rents and Quid Pro Quo DFI. The theme of Quota Rents was present in all eleven cases because foreign nations and firms in the industries impacted by the VER arrangement received the extra profit from import sales in the U.S. in return for limiting their supply. However, a strong connection could not be demonstrated between the firms earning quota rents and their Political Action Committee donations to Presidents who implemented trade protection. Quid Pro Quo DFI is the term that explains how foreign firms from Japan, South Korea and Taiwan located their television manufacturing plants in the U.S. to neutralize the lobbying pressure of organized labor. Quid Pro Quo DFI also explains why in the auto industry, both labor and a firm, General Motors, were persuaded to drop demands for trade protection.
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