US Trade Threats: Rhetoric or War

We present an empirical analysis of factors determining trade wars and agreements under U.S. trade law Section 301. A system of two probit equations is estimated using historical data on Section 301 cases to determine which economic and political factors increase the likelihood of trade frictions. The likelihood of trade war increases when the United States's export share in the world market declines, when the United States is less dependent on the market of the targeted country, when foreign policy makers are in an election year, and when negotiations relate to highly protected and unionized industries in the targeted country. Key words: probit estimation, Section 301, trade bargaining, U.S. trade policy. In the last twenty years, U.S. trade policy has evolved to encompass aggressive attempts to expand export markets and decrease foreign trade barriers on U.S. goods and services. The Clinton administration characterizes its trade strategy as a "results-oriented " approach, in which progress in trade can be numerically quantified (New York Times, 30 June 1995). The major tool used to implement this strat-egy is U.S. trade law Section 301, which en-ables the United States to extract unilateral trade concessions from its partners by threat-ening to impose trade retaliation if the tar-geted countries do not open specified markets to American exports. Section 301 has been used often to address foreign trade barriers on U.S. agricultural products. Of the eighty-three Section 301 cases analyzed in this study, forty-two cases involve the agricultural sector. For example, the recent agreement between Korea and the United States to improve market access for U.S. pork and beef products was obtained using Section 301 procedure. Under U.S. threats of trade sanctions, Korea dropped most of its shelf-life and temperature requirements on imported meat products (USITC)