M.Sc Thesis

M.Sc StudentIbragimov Ekaterina
SubjectThe Influence of Special Interest Groups on the Bargaining
Process of Uruguay-Round Trade Negotiations
DepartmentDepartment of Industrial Engineering and Management
Supervisors MS. Ella Segev
MR Gal Hochman
Full Thesis textFull thesis text - English Version


This study examines the role interest groups played in setting the international trade policy of US during the Uruguay Round trade negotiations.

The relations between domestic lobbying and the elected officials in setting trade policies are of great interest in many countries and wildly researched. While most of the existing theoretical and empirical works in this area have concentrated on examining the direct protection given by the government to lobbying groups in terms of tariffs barriers (high import taxes and export subsidies), here we take a new approach and assume that politics affect the level of protection indirectly by influencing the order in which issues are placed on the table during trade negotiations.

Political economy literature presumes that sectors, which are better organized, can receive higher benefits from the government. The organized industries are defined by the amount of money they contribute to Congress. Most empirical studies use data on  Political Action Commities contributions to identify powerfull lobby industries. However, the bulk of contributions in some sectors come from individuals. Here therefore we also examine the role played by individual contributions  in influencing trade process, using a new data set on individual contributions during the Uruguay Round trade negotiations. In order to identify politically organized industries in the trade arena, we estimate an auxiliary regression to predict trade-related spending using purely trade-related variables, such as import penetration  ratio, based on existing models.

Additionally to the contributions level parameter, which measures lobby power directly, interest industries can be measured by their size in terms of output and by their sheer voting strength in terms of employees’ number among other variables. The impact of these potential determinants on the agenda of negotiations is observed over the period 1986-1994, during Uruguay Round Negotiations in United States.

Our hypothesis is based on understandings drawn from the multi-issue bargaining theory, which assumes that in a bargaining game with conflicting priorities, each player prefers an agenda such that the first issue they choose to bargain on is the one they deem least important. Our hypothesis thus predicts a later place in negotiations process to stronger lobbies. The hypothesis was tested empirically by the order logit model, while the dependent variable is the position in negotiation order.

The results support the hypothesis. Lobbying activity affects not only the outcome of negotiations, but also the process leading to the outcome, via the order in which industries are brought up for negotiation.