Corporate Lobbying in Foreign Policy
Summary and Keywords
More Americans than ever before believe that money in politics weakens our democracy. Public opinion polls show that the number of people who believe that the country is run by a few big interests looking after themselves rose to nearly 80% over the past 20 years. The belief that corporate interests drive public policy is not all that surprising when you consider the growth of lobbying in the United States. According to the Center for Responsive Government, from 1998 to 2016, the amount of money spent on lobbying the U.S. government grew from $1.45 billion to $3.12 billion with well over 10,000 lobbyists in Washington. With this all this money attempting to influence policy outcomes in Washington, it is no wonder that Americans are skeptical of the intentions of government officials.
However, political scientists have found a more mixed result when it comes to the actual influence of money on politics. One study asked if the amount of money spent on any given issue really influences policy outcomes. Other studies have shown some benefit to the private parties that lobby. Thus despite significant research on the topic, there is little agreement among political scientists on just how lobbying influences political actors or if lobbying directly impacts policy results.
When it comes to foreign policy, corporate lobbies are an ever-present influence in the crafting of government policies. Whether in the European Union or the United States or other countries around the world, corporate lobbies view representing their interests in a truly global fashion. While corporate interests are investing in shaping foreign policy in a variety of issues areas such as defense spending, arms sales, contractors on humanitarian missions, one area is particularly vulnerable to corporate influence—trade and finance. Research shows that U.S. trade politics is heavily influenced by the lobbying of business organizations and trade associations. In fact, the U.S. administration often relies on interested corporate parties to provide it with both the expertise that shapes the agreement itself and the political case for trade liberalization that shapes the public pro-trade campaign. In turn, corporate lobbying for trade agreements is a costly and involved process. For example, during the eight years of negotiations over the TransPacific Partnership Agreement, a regional trade agreement between the United States and 11 other Pacific Rim countries, corporations paid $2.6 billion dollars to lobbyists to influence the content of the agreement and to promote it to Congress and the American public. An overview of the literature on corporate lobbying and an examination of the case of U.S. trade shows a particular example of how corporate lobbying works to influence foreign policy.
More Americans than ever before believe that money in politics weakens our democracy. Public opinion polls show that the number of people who believe that “the country is run by a few big interests looking after themselves rather than by a government concerned with all people” rose to nearly 80% over the past 20 years (Kull, 2008). The opinion that private interests rule public agencies is not all that surprising when you consider the growth of lobbying in the United States. From 1998 to 2016, the amount of money spent on lobbying the U.S. government grew from $1.45 billion to $3.12 billion and the number of lobbyists in Washington is well over 10,000 people (Center for Responsive Politics, 2017). With this all this money attempting to influence policy outcomes in Washington, it is no wonder that Americans are skeptical of the intentions of government officials.
However, political scientists have found a more mixed result when it comes to the actual influence of money on politics. One study asked if the amount of money spent on any given issue really influences policy outcomes. The study found that “PAC donations, lobbying expenditures, membership size, and organizational budgets have no observable effect on [policy] outcomes” (Baumgartner, Berry, Hojnacki, Kimball, & Leech, 2009, pp. 208–209). Other studies have shown some benefit to the private parties that lobby. For example, Gordon and Hafer (2005) found that corporations benefit by lower taxes when they contribute to political campaigns and deploy lobbyists on their behalf. However, as Godwin, Ainsworth, and Godwin (2012) state, “the only consistent finding [among scholars] about the relationship between lobbying and legislators’ behavior is that the relationship is not consistent” (p. 2).
This article will discuss the scholarly literature on how interest groups and lobbyists attempt to influence policy makers and shape policy outcomes. Specifically examined will be how corporate lobbies attempt to exert influence over foreign policy and how corporations lobby globally and perceive their interests as without borders. As a specific case study, the impact of lobbying on U.S. trade policy and the example of the TransPacific Partnership (TPP) agreement as an example of how corporate lobbying shapes U.S. trade politics will also be examined.
Pluralism and Elitism: Competing Models of Influence on Policy Making
Political science scholars disagree on just how much powerful groups influence political outcomes. One the one hand, scholars following a pluralist model of participation argue that multiple groups influence policy makers in any democratic system either directly through lobbying for particular interests or indirectly through participation in elections and political parties. The pluralist and neo-pluralist models of interest group influence acknowledge that different groups have different levels of resources but that on the whole the democratic system tilts toward a broader public opinion litmus test that offsets even wealthy, well-connected interest groups or lobbies (Smith, 2000). In other words, almost all interested parties can have some level of influence on political outcomes.
In contrast, many political scientists disagree with the pluralist model and claim instead that powerful, rich, and organized interests “buy” policy outcomes through political contributions, direct lobbying, and corporate “iron triangles” that meld business interests with political ones. This elite or exchange model of interest group influence sees an undemocratic shift in politics where those with money have increasing sway over policy making elites. In both cases, scholars have provided examples and evidence to support the competing models of political influence.
In the 1950s–1970s, the pluralist model of interest group influence dominated the political science literature. In part this was because the extent of corporate power and influence at that time was dwarfed by current standards. In the 1950s and 1960s, labor unions were more powerful, corporations were less frequently involved in Washington politics, and public interest groups were on the rise (Drutman, 2015a). Scholars advocating for a pluralist model of interest groups examined the competing interests of multiple groups (Godwin et al., 2012). Building off of an influential book by David B. Truman (1951), The Governmental Process, scholars emphasized the proliferation of interest groups in response to an economic or social event that adversely impacts people or institutions. As one group organizes a response, and lobbies to impact policy, other groups react and mobilize. Thus, interest groups arise in clusters in reactions to each other forming mobilizations and counter-mobilizations (Truman, 1951).
The pluralist model of interest groups helps explain the proliferation of groups since the 1960s, but the research is far from conclusive about whether or not multiple groups have similar success lobbying policy makers. Not long after Truman’s influential book, C. Wright Mills (1956) argued in his book, The Power Elite, that while there may be many interest groups, only a few, wealthy ones really have the influence that matters. Mills contends that a powerful consensus of interests emerged between big corporations, the military, and the government that overshadows any attempt at gaining influence by ordinary citizens. This work led to the rise of an elite model of interest groups that attempted to provide evidence for what many people intuitively suspect: that corporations and the powerful have undue influence on politics.
In 1961, Robert Dahl responded to Mills’s elite model of political influence with his book, Who Governs? One of his key findings was that, in line with a pluralist understanding of political influence, multiple groups wield power and influence policy outcomes but usually only within specific issue areas. For example, one could not argue that environmental groups were broadly influential but only that they wielded power within specific environmental policy decisions. His influential work successfully demonstrated that the story that the powerful always wins in politics is not the case.
For the next several decades, the two models—pluralism and the elite model—offered competing but never conclusive explanations of how groups influence policy makers. Some scholars argued that certain iron triangles form between business interest groups, Congress, and bureaucracies that give more power to producers over consumers, thus harming the public interest (Lowi, 1969). Following an “exchange model” of interest group influence, these scholars contend that the three corners of the iron triangles participate in mutually beneficial exchanges such as subsides, campaign contributions, and support on different legislative issues. As Godwin and colleagues (2012) describe, President Clinton provided exchanges with congressional representatives in order to garner support for the North American Free Trade Agreement (NAFTA) that included both private and public goods that benefited legislators and businesses in their home districts.
Other scholars argued that rather than “iron triangles,” the study of several policy issues, revealed heavy participation by citizen action groups as well as typical involvement by business. This led Hugh Heclo (1978) to suggest that “issue networks” appeared to form around particular policy issues and these networks included the “iron triangle” participants of business, congressional representatives, and bureaucratic actors as well as a plethora of non-governmental actors, think tanks, and public interest groups. Issue networks include competing business interests, for example, small groceries and big agriculture, as well as anti-business coalitions. The issue networks literature demonstrates how widespread the multiple interests might be for any one given policy area but it does not explain why certain groups win. While they help explain the process and the participants and demonstrate that is it not always the one with the most money that matters, the literature provides competing conclusions about when and if money matters.
In summary, since the 1950s, political scientists and other scholars have attempted to determine just how much influence organized interest groups exert over policy makers and policy outcomes in democratic systems. The pluralists (and neo-pluralists) such as Truman (1951), Dahl (1961), Salisbury (1992), Lowery and Gray (1995), and others suggest that a multiplicity of groups have access to the political process and contribute expertise and technical knowledge as well as advocacy for public and private interests to the political process. On the other hand, elite model theorists and exchange theory advocates such as Mills (1956), Olson (1982), Schlozman and Tierney (1986), and others view democratic political processes as biased in favor of powerful elites and moneyed interests that “purchase” policies via campaign contributions and influence political actors in favor of a few, private interests and thus break the political commitment of policy makers to the public good. Neither side has convincingly won the argument, and this in part rests on the unsettled question of just how much political impact lobbying, particularly corporate lobbying, has in influencing political outcomes.
Interest Groups and Foreign Policy
While the literature on pluralism and the elite model do not distinguish between the domestic and foreign policy focus of interest groups, it is important to recognize that the majority of interest groups focus on domestic issues rather than foreign policy. Generally the public is more interested in and concerned with domestic issues, and it is easier for interest groups to rally support or protest against more local, pocketbook issues. In foreign policy, decisions often need to be made quickly, the public is less engaged, and the results are dependent on other countries and not entirely in control of the domestic policy making machine (Uslaner, 2004). Especially in U.S. politics, constituents generally expect their representatives to bring home benefits to the local communities. and thus there is a disincentive for representatives to focus on foreign affairs and therefore less incentive for groups to attempt to influence them. As one member of the Senate Foreign Relations Committee once said, “[Being on the Foreign Relations Committee] is a political liability . . . You have no constituency” (Fenno, 1998). Without a constituency, there is less pressure from interest groups but also less leverage for groups to wield to attempt to influence a result.
Despite this, there is a significant increase since the 1970s in the number of interest groups and lobbies participating in foreign policy, especially in the United States. One main reason is the increase in globalization and thus the interconnectedness of even seemingly domestic issues with other countries. For example, it is impossible to think of a local issue like fracking in Oklahoma without connecting it to the global energy market. Another reason for the increase in interest group attention on foreign affairs is a lack in overall consensus on foreign policy between the political parties—particularly as a greater variety of threats emerge—and this gives opening to a greater number of groups to try and influence what foreign policy directions the executive branch should prioritize (Uslaner, 2004). Moreover, the sheer growth in the number of groups actively involved in politics and now mobilized by the Internet and a greater ease of communication makes it inevitable that a greater number of groups would be involved in lobbying for foreign policy directions.
The types of interest groups most often discussed in the literature on lobbying and foreign policy are ethnic groups, foreign government lobbies, religious groups, non-governmental groups, and corporate lobbies. Ethnic group lobbying refers to interest group lobbying by domestic ethnic groups often on issues related to the home country. One of the best organized and most highly funded ethnic lobbies in the United States is the Israel lobby (Mearsheimer & Walt, 2007). Scholars have examined how and why the Israel lobby in particular is successful at influencing U.S. foreign policy toward Israel and what distinguishes this ethnic lobby from the many others. Another branch of the literature examines the impact of foreign government lobbies on foreign policy decisions. Over the past few decades, foreign governments have expanded beyond typical diplomatic influence such as exchanges, embassies, and ceremonial visits to more direct forms of lobbying on behalf of the foreign governments’ interests. For example, by the early 1990s, Japan, the United Kingdom, Canada, Germany, France, and Mexico were the biggest spenders on these kinds of activities in the United States (Uslaner, 2004). Religious interest groups are also seeking to influence foreign policy outcomes. While many anti-war groups organized through Catholic churches, the 1990s saw a rise in fundamentalist Christian groups advocating for foreign policy issues such as cutting funding for women’s health clinics abroad that offered abortion services (McVicar, 2016). NGOs (non-governmental organizations) are perhaps the best-known interest groups for both domestic and foreign policy issues because they engage in outside lobbying—engaging the public and the media in either for or against actions on policies. Finally, corporate lobbying is one of the least understood but by far the biggest spender on interest group lobbying. This article examines the impact and influence of corporate lobbying on foreign policy.
Corporations and Political Influence
While there is some political science literature on the political activity of corporations and why corporations decide to spend considerable amounts of money attempting to influence policy outcomes via lobbying (Cox, 2012; Drutman, 2015a; Grossman & Helpman, 2002; Hansen, Mitchell, & Drope, 2005; McKeown, 1994; Waterhouse, 2013), it is surprisingly thin in comparison to the literature on non-business related interest groups. Lee Drutman (2015b) points out that “despite the seemingly predominant role that individual businesses and their associations play in Washington, DC, scholar Graham K. Wilson (1990, p. 33) estimated that there are about a hundred political scientists studying parties and elections for every one studying business and politics.” This is surprising because in terms of interest group lobbying, corporate lobbying far outspends all other types. In 2015, for example, the biggest companies had over 100 lobbyists, many of them in-house permanent business divisions, and spent approximately $34 for every $1 spent by labor unions and public interest groups combined. In fact, 95 of the 100 organizations that spend the most on lobbying represent businesses (Drutman, 2015b).
Compared to other types of interest groups, corporations spend money on lobbying and contribute to elections campaigns because they lack other forms of influence such as mobilizing members, appealing to constituents, or inspiring grassroots activism. This distinction is referred to as inside versus outside lobbying (Kollman, 1998). Inside lobbying refers to direct lobbying of officials by insiders or lobbyists often through personal access, connections or insider-only events. Outside lobbying refers to public campaigns, appeals to members, or organized grassroots efforts targeting constituents with the intent to mobilize the public to contact legislators, write letters, or showcase support for a policy to Congress. Corporate lobbyists have fewer resources for outside lobbying compared to other types of interest groups.
For example, one of the most powerful lobbying groups is the AARP, formerly known as the American Association of Retired Persons. The organization has nearly 40 million members that can be mobilized to contact representatives, send letters, and donate money in a coordinated effort to influence politics via outside lobbying. This, combined with the $8.7 million spent lobbying in 2016, makes the interest group a very powerful, but noncorporate, lobby.
Corporations, however, have no direct “members” other than members of the board and cannot rely on everyday Americans to advocate on behalf of their interests. As Thomas Holyoke (2014) states, “Without any clear constituent connection, giving money is often the only way [corporations] can hope to influence policy decisions” (p. 270). However, “giving money” can have very powerful effects and some scholars argue, can also change the climate and attitudes toward an issue such that American interests become more in line with corporate interests and make it easier for corporate lobbying to be successful (Waterhouse, 2013). For example, lobby spending on U.S. defense-related issues is regularly in the top eight for all lobbying spending in a given year. In 2015, defense contractors spent $128 million lobbying Congress and during the 2016 presidential campaign, the defense industry spent a record-breaking amount of money on super PAC campaign donations to congressional campaigns as well (Dillow, 2015).
But does this spending actually equal influence on policy outcomes? This question has plagued political science scholars and economists alike. In 1994, Gene Grossman and Elhanan Helpman began their influential article on the impact of campaign contributions on trade policy by stating, “When asked why free trade is so often preached and so rarely practiced, most international economists blame ‘politics’” (p. 833). This statement demonstrates how unpredictable domestic politics can be—even with spending significant money on lobbying, the results are not guaranteed. Scholars Brasher and Lowery (2006) point out that the existing literature fails to develop consistent empirical findings on when and if corporate lobbying actually impacts policy makers’ decisions. They suggest that this failure in part rests on the focus of the literature on an instrumental understanding of lobbying as “narrowly driven by the pursuit of specific and immediate policy benefits” (p. 2), the tendency to select only large corporations to study, and the focus only on lobbying as contributions to political action committees. Instead, Brasher and Lowery argue that greater attention must be paid to a wider range of companies beyond the Fortune 500 benchmark. Lee Drutman (2015a) gives perhaps the most useful and practical explanation of how to define and understand corporate lobbying. He agrees with Brasher and Lowery that lobbying is frequently defined too narrowly by political scientists and thus the bulk of corporate influence is missed. He explains that corporate lobbying most often involves not just campaign contributions but “advocacy efforts” that involve very large sums of money spent on services such as how to prepare testimony, fund think tank studies, and determine how to craft a proposal that accomplishes a legislative goal—all complex tasks that are critical for successful influence. And none of which are campaign contributions. For this reason, Drutman defines corporate lobbying broadly as “corporate political activity,” much of which is beyond donating money to campaigns or super PACs.
The Financial Sector: An Example of Corporate Influence
As an example, in the United States, the financial sector spends money both on political campaigns and also participates heavily in “political activity” to influence policy legislation. During the 2008 political campaign, the financial sector including Goldman Sachs, JP Morgan Chase and Citigroup spent nearly $70 million in campaign contributions, $40 million to then-candidate Barak Obama, outspending every other economic sector (Skidmore-Hess, 2012). They gave considerably more money to Democrats ($40 million to $29 million), and on the whole, the largest business groups supported Obama by wide margins (Skidmore-Hess, 2012). Despite the economic crisis, which resulted in the worst U.S. recession since the Great Depression, the banking industry lobbying during and after the 2008 campaign resulted in heavy influence on any considered congressional reforms to the financial sectors. As Senator Dick Durbin (D-Ill) stated in an interview as he attempted to pass a bill on bankruptcy through the Senate in 2009, “The banks—hard to believe in a time when we’re facing a banking crisis that many of the banks created—are still the most powerful lobby on Capitol Hill. And they frankly own the place” (Grim, 2009).
The amount of money spent by the financial sector did garner significant results, especially given the anti-corporate climate that followed the 2008 financial meltdown and the rise of the Occupy Wall Street grassroots movement. Despite some attempts by the Obama administration to regulate big banks through legislation such as the Dodd-Frank Act, stricter limitations on the type of financial products that led to the financial crisis failed. Moreover, after the 2010 Dodd-Frank Act passed, the financial and real estate sectors dedicated significant lobbying spending to weaken the regulations imposed by Dodd-Frank, especially with the new, Republican gains in Congress in 2014. In 2015, the New York Times reported “the financial industry has been methodical, drafting technically complicated legislation that can pass the heavily Republican House with a few Democratic votes. And then, once approved, Wall Street has pushed to tack such measures on to larger bills considered too important for the White House to block” (Weisman & Lipton, 2015).
Weakening Dodd-Frank took a concerted and coordinated effort by industry groups—and a lot of money. In 2014, the securities and investment industry spent nearly $74 million on lobbying—on 704 registered lobbyists—according to the Center for Responsive Politics. That was on track to easily beat out the $99 million spent in 2013. By the end of the 2014 mid-term elections, Wall Street banks and other financial interests had spent $1.2 billion on campaign contributions and lobbying Congress, on track to spend more than in 2010 when Dodd-Frank was introduced as legislation in Congress (Weisman & Lipton, 2015). But perhaps the lobbying efforts’ greatest success was in convincing the American public that imposing regulations on the banks that caused the financial crisis was bad for the American economy. Benjamin Waterhouse (2013) states corporate lobbying not only lobbies Congress for legislation more in line with their own interests, but also successfully lobbies for the idea that deregulation is good for the American economy to Democrats and the American public alike. As Kevin Drum (2010) states in his article on financial sector lobbying during the Obama years, “unlike most industries, which everyone recognizes are merely lobbying in their own self-interest, the finance industry successfully convinced everyone that deregulating finance was not only safe, but self-evidently good for the entire economy, Wall Street and Main Street alike.” This example shows how pervasive, persistent, and penetrating corporate lobbying is in American politics.
While corporate lobbying is especially pervasive in American politics, it also has a global reach and increasingly, transnational corporations recognize that a global business requires a global influence no matter the region, government type, or domestic political climate. With the expansion of the European Union (EU), Brussels, its de facto capital, has quickly become a destination for corporate lobbyists. In fact, more lobbyists are in Brussels than in any other city in the world besides Washington, DC.
In summary, corporate lobbies in particular often have a huge stake in foreign policy decisions. Whether the issues relate to the opening of markets abroad, environmental regulation, intellectual property rights, or the size of the defense budget, corporations see engagement in foreign policy decisions as critical to business success in a globalized world.
Corporate Lobbying and the Policy Process
In Godwin et al. (2012), the authors explain that in order to understand how lobbies can influence policy outcomes, the policy process must be examined. By understanding the legislative process and when and how it is open to input from interest groups, one can understand how lobbies try and shape outcomes. Think of the policy process as a set of stages from agenda setting to policy formation to decision making to implementation to evaluation and feedback (Godwin, et al., p. 50). Corporate lobbies tend to be more successful and often heavily involved in the policy formation and implementation parts of the process compared to other groups such as citizen action groups or grassroots groups that are more influential in the agenda setting stage (Chubb, 1983). For example, the banking and financial sector has been a steady donor to members of the House Financial Services Committee, where financial legislation typically gets started. During the 2014 Congress, Representative Jeb Hensarling of Texas, the Republican chairman of the committee, received donations on 13 separate occasions from political action committees run by Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase (Weisman & Lipton, 2015).
Indeed, it is the influence of business interests on setting the parameters, providing the expertise for, and often formulating critical parts of the policy in question that raises alarm bells about corporate influence on politics (Waterhouse, 2013). The U.S. coalition approach to business lobbying and the coordination of corporate spending to influence the legislative agenda to be more positive toward business came after falling business profits during the 1970s and early 1980s (Cox, 2012). The top 500 industrial firms saw a dramatic drop in the rate of profit during this time from 7.7% during the period from 1973–1981 down to 4.8% during the period from 1982–1986 (Prechel, 1997). In this context, the Business Roundtable emerged in 1972 from a coalition of CEOs and a series of informal meetings held by big business leaders. The Business Roundtable represents the most internationally competitive sectors of U.S. business, and at its inception, “served as a kind of all-purpose political consulting organization to develop long-term strategic thinking for corporations faced with declining rates of profit” (Cox, 2012, p. 18).
The formation of the Business Roundtable during a critical period represents early recognition that a coordinated effort by business was needed to counter deep discontent among American workers and organized labor with large corporations. With trade associations and business groups like the Roundtable, large corporations could work together to create a common message about the role of business in the American economy. As Alcoa CEO and formative leader of the Roundtable said in 1975 shortly after the formation of the Business Roundtable, “Overall, it becomes clear to me that business must take an active, aggressive role in developing understanding of and support for the free-market system by reestablishing the public’s confidence in business. Without question, we have our work cut out for us” (Waterhouse, 2013).
Groups like the Business Roundtable are often critical in the early stages of economic legislation. Government officials rely on these kinds of groups for advocacy, expertise, and marketing of sometimes publically unpopular free trade agreements. For example, at the policy formation stage of NAFTA, Mexican President Salinas reached out to the U.S. Business Roundtable for help in convincing then President George H. W. Bush that negotiating a free trade agreement with Mexico was a policy priority. Once convinced, President Bush formed the Advisory Committee for Trade Policy and Negotiations made up of CEOs, presidents, and members of the Business Roundtable as well as some labor groups for help in drafting U.S. positions on trade issues (Godwin et al., 2012). Groups like the Business Roundtable were critical in pushing NAFTA onto the agenda as well as facilitating policy recommendations for the trade legislation. Such groups often build coalitions to further their collective interests and to streamline messaging to maximize impact of the policy process (Waterhouse, 2013).
Lobbying abroad shares many features of lobbying in the United States. In fact the European Commission’s definition of lobbying activities, or “interest representation” as the EU refers to it, sounds similar to a definition of lobbying from an American textbook. It defined lobbying as “all activities carried out with the objective of influencing the policy formulation and decision making processes of the European institutions” (Lobbying the EU, 2013). However, the process of lobbying the EU is different due to its unique organizational structure.
Because the EU has a supranational structure—the overarching institutional body that governs the 28 member states—as well as the individual governments of member states, there are two approaches to take for lobbyists—the European one (targeting the EU institution itself, known as the Brussels route) or the national route (targeting member states such as Germany) (Greenwood, 2011). Bernhagen and Mitchell (2009) examine why transnational corporations from outside the EU often take the “Brussels route” and deploy direct lobbying at EU officials rather than attempting to influence particular member states. They found that the absence of government patrons (i.e., member states) to advocate for their interests incentivized them to work on the European level. In the words of Cowles (1997), “the Brussels-based [corporations] believed that they were disadvantaged with their European counterparts because they did not have a “patron,” a member government with which they could work on European matters. The American companies realized that if they wished to influence European policy, they would have to do so at the supranational level” (p. 126). Bernhagen and Mitchell (2009) explain “this logic applies to U.S., Japanese and Korean corporations producing for global markets, including the common market of the EU. It applies with increasing force to corporations from countries neighboring the EU, from member states of the European Free Trade Association (EFTA) with very strong trade links to EU countries and from within the European Economic Area (EEA) that operate primarily within a common European market but are without government” (p. 158). This shows why lobbying in Brussels has skyrocketed over the past decade and indicates the unique targeting of a supranational institution in lobbying efforts outside of the United States.
Similar to U.S. corporate lobbying strategies, the EU policy formation stage is an entry point for corporate lobbyists to have a huge impact on the formation of policy before it reaches the legislative decision making stage. Just like in the United States, business groups are most often consulted as “experts” in policy areas and solicited for information and advice in crafting policy largely behind closed doors. In the EU, “expert groups” are a formal part of the policy formation process and play a highly influential role in the early stages of EU policy making (Rumsey, 2015). A report by the ALTER-EU coalition describes their influence: “The composition of the Expert Groups, and the interests that are represented, will to a large degree determine the outcome of the consultation. The input provided by such Expert Groups often forms the backbone of the European Commission’s proposals and through a process that often involves very little change, eventually become adopted as European legislation” (Vassalos, 2008). In 2015, there were over 760 expert groups contributing to policy on issues such as agriculture, taxation, financial services, tobacco regulation, and climate change (Rumsey, 2015). However, the majority of the expert groups represent corporate interests and public interest groups are severely underrepresented. Indeed, just like in the U.S. lobbying process, targeting policies as they are formed and developed is the most desired tactic of corporate lobbyists.
Given the long history of lobbying in the United States, it is perhaps unsurprising that American corporations are the most effective and influential foreign lobbyists in the EU. According to the Sunlight Organization, American corporations are actively influencing EU policy through “direct lobbying, participation in trade associations, contracting with independent lobbying and political communications firms, membership in Expert Groups and more. They use all available avenues to push their policy goals and ensure that their strategic messages are heard” (Rumsey, 2015). U.S. lobby groups dominate the Brussels lobbying scene and in 2015, groups representing American corporate interests took the top 5 spots on Integrity Watch’s list of most foreign country meetings with the European Commission. Meanwhile, only one Chinese group cracked the top 100, and India, Japan, Brazil, Russia, and other major non-EU nations went unrepresented entirely (Lobbying the EU, 2013). American influence comes from many sectors, but is particularly strong in industries that are truly global—technology, trade, and finance to name a few.
Brussels is also host to an American counterpart to the Business Roundtable. The American Chamber of Commerce to the European Union is one of the most effective lobbying groups and works on behalf of 140 American companies with operations in Europe (Rumsey, 2015). Corporations such as Oracle, Intel, IBM, Coca-Cola, UPS, Cisco, GE, JPMorgan, 3M, United Technologies, Caterpillar, AT&T, and more are represented and the group has an annual budget of just over one million dollars (Lobby Planet Guide, 2015). While the structure of the EU is unique, the influence of corporate lobbies on policy outcomes is very similar to the United States and corporations have a truly global presence when it comes to representing their interests.
In all, money is not the only measure of corporate influence on policy outcomes. Actively engaged in policy formation, corporate lobbies exert an unprecedented amount of influence on what foreign (and domestic) policy looks like before it reaches a legislator’s desk. As one critical scholar states, corporate influence can be seen in the money and the networks of pro-business groups collaborating with policy elites that over time have “eviscerated regulation” and promoted big business, friendly legislation (Cox, 2012).
Corporate Lobbying and U.S. Trade Policy
One area of foreign policy in which corporations have a vested interest in shaping outcomes is trade. Corporations are impacted significantly by the political choice to either liberalize or protect trade with other countries. Policy makers face a dilemma when deciding to support or reject free trade—on the one hand, the support of business is often critical for reelection campaigns; but on the other hand, there are various winners and losers when it comes to free trade including constituent jobs, local businesses, and big and small agricultural industries. This final section will discuss some of the literature on corporate lobbying and trade politics and use the example of the TransPacific Partnership regional trade agreement to illustrate how corporate lobbies have mixed success in influencing foreign policy outcomes.
As previously discussed, interest groups attempt to influence policy outcomes in three general ways: by influencing votes through encouraging members to vote a certain way in an election and thus holding influence over a politician; by providing information and expertise in particular areas of policy such as health care or economics; and by contributing money to political campaigns (Grossman & Helpman, 2002). In terms of trade policy, corporate groups emphasize expertise and money, while non-governmental organizations, labor groups, or grassroots mobilizations emphasize mobilizing voters. The literature on lobbying and trade focuses on how money impacts trade policy outcomes as well as how business groups are involved in the policy formation stage of trade and economic legislation.
However, it is important to recognize that while most corporations favor globalization and thus, liberalization (Cox, 2012), when trade policy is examined closely, there are often competing business interests that favor some protectionism. On the one hand, the literature on lobbying and trade focuses on the theory of endogenous protection that identifies the conditions under which corporations lobby for protectionism (Baldwin, 1985; Grossman & Helpman, 1994; Hillman, 1982; Magee, Brock, & Young, 1989; Mayer, 1984; Trefler, 1993). On the other, another group of scholars examined how governments respond to the interests of export-oriented corporations that advocate for reducing trade barriers (Destler & Odell, 1987; Gilligan, 1997; Hansen & Mitchell, 2000; Milner, 1987; Milner & Yoffie, 1989; Schattschneider, 1935).
Gawande and Hoekman (2006) examined the continued practice of agricultural protectionism in developed economies despite high costs to consumers and found confirmation that there is a connection between the amount of money spent by agricultural industry lobbyists and continued protections in the form of tariffs or subsidies to the agricultural sectors. Like the findings of Grossman and Helpman (1994) before them, protectionism and not liberalization is thus for sale to the highest corporate bidder. However, Gawande and Hoekman (2006) also found that lobbies make contributions to a number of political actors without specifically knowing which ones can or will make a difference in the legislative outcome. There is no one political actor in charge of trade legislation; it is a messy process with multiple actors involved including congressional committees, political parties, competing lobbies and interest groups, bureaucracies and agencies, and the executive branch. One reason that large amounts of money are often spent to attempt to influence trade policy outcomes is precisely because the process is so uncertain and diffuse. Money is given before any protectionism is granted, for example, and thus “lobbying contributions are made in advance of knowing the outcome” (Gawande & Hoekman, 2006).
On the other hand, scholars emphasize the power and effectiveness of the business industry as a whole to shape the conversation and the context especially in the policy formation stage (Godwin et al., 2012; Waterhouse, 2013), and there is recognition that the most highly resourced corporations tend to be exporters, and thus in support of trade liberalization. Moreover, Kim (2017) found that import-sensitive firms favoring protectionism are less impacted if they have high product differentiation and are thus less likely to provide a counter-lobby to liberalization-favoring industries. This implies that while the literature assumes that there is domestic pressure on governments from businesses to protect certain industries, there is actually a greater likelihood that liberalization-favoring industry lobbies will have more influence (and spend more money).
Drutman (2015a), much in line with Waterhouse (2013), argues that U.S. trade politics is heavily influenced by the lobbying of business organizations and trade associations. Barfield (2000) agrees and notes that the United States in particular relies on interested parties “to provide it with the analytical and political case for further trade liberalization in a particular sector or for retaliations against the infraction of existing trade rule in a particular sector” (p. 272). This is in part because the bureaucracy of U.S. trade is minimal when compared to other developed economies and Congress passed a series of trade acts (1974, 1984, and 1988) that called for closer working relationships between the public and private sectors. Thus the trade advisory committees and growth of lobbies focused on informational lobbying. In all, while there is debate in the literature about how to examine corporate influence on trade due to competing interests, there is some agreement on corporate lobbying strategies and strengths, and there is little doubt that corporate involvement in trade politics is growing. Yet, it is often hard to measure the success or failure of any given lobbying effort and in particular to determine in advance if a given lobbying strategy, message, or effort will be successful. The next section illustrates the dilemmas of corporate lobbying and trade with the example of the TransPacific Partnership trade agreement that fell apart in 2016 with the election of Donald Trump, after eight years of negotiations.
Corporate Lobbying and the TransPacific Partnership
In the summer of 2015, it seemed all but certain that President Obama would pass his signature trade legislation, the TransPacific Partnership (TPP), in his last year of office. The TPP, the largest regional trade accord in history, would have set new terms for trade and business investment among the United States and 11 other Pacific Rim nations—a group with an annual gross domestic product of nearly $28 trillion that represents roughly 40% of global GDP and one-third of world trade. As a central part of President Obama’s “Asia Pivot,” the administration along with the Department of Commerce, the Office of the United States Trade Representative, and hundreds of corporate interest groups were pushing hard to press Congress for trade promotion authority, and eventually for passage of TPP in Congress. Midway through 2015, more Americans supported the trade agreement than opposed it (Washington Post/ABC Poll, 2015), and in May 2015, the Congress approved trade promotion authority (sometimes known as fast-track), and President Obama subsequently signed the TPP at the beginning of 2016 and prepared to push it to ratification in Congress—the final step needed for the United States to join the agreement.
While the administration was not anticipating a particularly easy legislative battle, the TPP had unparalleled support by the business community and corporate lobbies. The Center for Responsive Politics reported that during the eight years of TPP negotiations, companies and groups paid $2.6 billion to lobbyists while TPP was on their agenda (Tucker, 2015). In just the first two quarters of 2015 alone, members of the pro-TPP coalition spent $261 million lobbying for TPP (Wilts, 2015).
As in the past, business groups, trade associations, and corporate lobbies heavily supported the TPP and worked collectively to have the most influence. In 2016, the New York Times reported that “on top of the Emergency Committee for American Trade, the U.S. Coalition for TPP has beefed up its ranks with the American Farm Bureau Federation, the Business Roundtable, the National Association of Manufacturers, and the U.S. Chamber of Commerce in the battle to convince Congress to approve the Trans-Pacific Partnership” (Needham, 2016). Reuters reported that in 2015, the U.S. Chamber of Commerce spent the most on lobbying for TPP of any of the business groups. For example, in the second quarter, it spent nearly $18 million, up 29% from the first quarter (Wilts, 2015). The Business Roundtable said lobbying both in support of trade promotion authority and TPP was a “significant part” of the company’s overall expenditures during the second quarter of 2015.
In addition to business coalitions, specific export-oriented corporations poised to benefit from lower tariffs with partner countries also lobbied heavily for TPP. For example, the agriculture sector was involved from the beginning of the negotiations with corporations and industry groups such as Cargill, the American Farm Bureau Federation, Monsanto, the Biotechnology Industry Organization, Caterpillar, Dairy Farmers of America, the National Pork Producers Council, Louis Dreyfus Commodities, several state-level farm bureaus, and a long list of other agribusiness powerhouses all reported lobbying on the trade deal (Holly, 2015). Opposing interest groups also spent money lobbying. For example, the labor union AFL-CIO increased its lobbying expenses by more than 43% between the first and second quarters to $920,000, not including subsidiaries.
Corporate Lobbying and TPP Policy Formation
As discussed, scholars have found that corporate lobbies have particular influence in not just shaping outcomes, but in shaping the policy at the early stages to be favorable to business interests. With trade policy in particular, policy makers rely on business groups for information and expertise and thus, lobbying in the early stages of development gives advantages to corporate lobbies over other types of interest groups. This was especially the case for the TPP as it was negotiated over eight years and from 2008–2013 remained secret from the public. During this period, corporations had unprecedented access and influence to the crafting of the trade agreement beyond the purview of the public eye. If one considers that the final agreement was over 5,000 pages long, it is possible to imagine that there were many entry points for lobbyists to insert particular interests that benefit their clients.
The Center for Responsive Government shows that from 2010–2013 (when the agreement became public) the amount of mentions of TPP in lobby disclosure reports increased over 600%. Drutman (2014) reports that during this “policy formation period” of negotiations and finalizing what would be in the trade agreement, a relatively small but cohesive group of businesses were heavily involved in the process.
In 2009, 28 organizations filed 59 lobbying reports mentioning the then far-off trade agreement. Almost half of those organizations were pharmaceutical companies or associations—two and a half times more than the next most active industry (Drutman, 2014). As Drutman states, “It was an early clue as to which industry would take the most active role in trying to shape the trade agreement while it was still secret from the public.” The pharmaceutical industry was not alone in the early lobbying designed to shape the trade agreement. Next on the list are auto manufacturers (101 reports), followed by clothing and accessories (89 reports), milk and dairy products (82 reports), and textiles and fabrics (82 reports). This early-stage involvement by corporate lobbies demonstrates the extent of corporate influence on legislation—it’s not only about spending but also about access, information control, and a lack of countervailing interests or public opposition.
Corporate lobbying was also influential at the decision making stage as evidenced by the amount of direct lobbying money given to congressional members as they debated whether or not to support trade promotion authority (fast-track), a critical first test for TPP in Congress. The U.S. Senate eventually passed Trade Promotion Authority by a 65-33 margin on May 14, 2015. The Guardian, using data from the Federal Election Commission, analyzed all donations that corporate members of the U.S. Business Coalition for TPP made to U.S. Senate campaigns between January and March 2015, the three months before the Senate vote. The article found that out of the $1,148,971 given to Senate campaigns, an average of $17,676.48 was donated to each of the eventual 65 “yea” votes (Gibson & Channing, 2015).
This was particularly lucrative if the congressional representative was running for reelection. For example, the article states that two days before the vote, President Obama was a few votes shy of having the filibuster-proof majority he needed. On May 12, Senator Ron Wyden and seven other Senate Democrats announced they were on the fence and open to possibly supporting the fast-track bill. Within 24 hours, “[Representatives] Bennet, Murray, and Wyden—all running for re-election in 2016—received $105,900 between the three of them. Bennet, who comes from the more purple state of Colorado, got $53,700 in corporate campaign donations between January and March 2015.” All three changed their nay vote and supported trade promotion authority to fast-track TPP. Another example, Senator Rob Portman of Ohio, was an early and ardent supporter of TPP and of approving trade promotion authority for President Obama. The Guardian reported that he received $119,700 from 14 different corporations between January and March 2015, the largest donations coming from Goldman Sachs ($70,600), Pfizer ($15,700), and Procter & Gamble ($12,900) (Gibson & Channing, 2015). The relative ease in obtaining trade promotion authority in May 2015 gave the false impression that the powerful and influential supporters of TPP were likely to be successful in the coming year.
However, the following November revealed increased pressure on the Obama administration when the text of the final TPP agreement was released to the public. Upon full reading, many groups admonished the Obama administration for keeping the trade agreement negotiations secret (at least to the public) for the past eight years (McDermott & Manna, 2016). Senator Boxer (D-CA) railed against the secrecy surrounding the contents of the TPP saying “that before she could read the agreement, a guard ordered her to leave behind any electronic devices and told her she could take handwritten notes only if she surrendered them afterward . . . God knows why this is . . . classified. It has nothing to do with defense, nothing to do with going after ISIS” (Lochhead, 2015). At this point, interest group lobbying expanded to include more citizen action groups, non-governmental groups, as well as grassroots actions. Moreover, the 2016 presidential election season was just heating up. This did not bode well for passing TPP.
As stated earlier, while corporate interest groups have the advantage in policy formation and implementation, public interest groups tend to gain advantage and momentum at the decision making stage, and it was at the decision making stage that the passage of TPP began to run into unexpected challenges.
Corporate Lobbying and Unexpected Outcomes: The Death of TPP
As mentioned, scholars recognize that while the amount of corporate spending on lobbying is certainly greater than other interest groups, money and influence does not always guarantee legislative success because politics is very uncertain (Drutman, 2015a; Gawande & Hoekman, 2006; Waterhouse, 2013). In the case of TPP, there were several unexpected developments that led to a disappointing outcome for President Obama’s signature trade agreement including public scrutiny of the agreement; lack of coherent pro-trade messaging on the part of the Obama administration; and primarily, the emergence of a powerful election year populism that rode in on an ardent anti-trade rhetoric almost universally adopted by all major presidential candidates.
The first challenge was simply exposing the agreement to public scrutiny, and thus allowing a greater variety of groups and citizens to become involved in the decision making process. When the text of the agreement became public in November of 2015, naturally more interest groups joined in attempting to influence policy makers and this led to a rise in countervailing lobbies opposing TPP. It also revealed the final draft of the agreement after 8 long years of negotiations with 11 other countries, and not all early corporate champions were happy with the proposed outcome. Some of the earliest involved, and most generous corporate spenders, were unhappy with the final text and despite spending millions of dollars promoting TPP, they switched positions, and actively opposed the agreement along with the rising number of public interest groups. For example, the Pharmaceutical Research and Manufacturers of America were one of the earliest supporters of TPP and intensely involved in the policy negotiations spending $110 million in 2009, the first year of TPP negotiations alone (Tucker, 2015). However, once the final agreement showed that negotiating countries had agreed to a shorter period during which corporate data on biologic drugs may be kept secret, the group pulled its support of TPP, and joined the AFL-CIO and the Sierra Club among others in actively lobbying against TPP in Congress.
A second challenge for passing the TPP was inconsistent White House public messaging for the agreement and a confusing anti-China narrative that mixed the story of TPP economic benefits with a national security motive. Scholars such as Amy Skonieczny (2001) have argued that pro-trade legislative victories such as NAFTA hinged on a national identity narrative that drew on typical (and derogatory) country stereotypes to make the trade agreement palatable and unthreatening to the U.S. public. She has also found that national identity narratives of other partner countries have been central to pro-trade messaging in U.S. trade agreements with China and Russia (Skonieczny, 2017).
In the case of TPP, the White House failed to establish any national identity narrative, good or bad, about the 11 partner countries in the trade agreement, and instead, the Obama administration focused its identity narrative on an anti-China message that stated that TPP would balance against a corrupt and menacing Chinese influence in Asia (Skonieczny, 2016). Yet, because China was not in the TPP agreement, this led to confusion in messaging regarding just what the TPP stood for or represented. With the White House “us-them” narrative incorporating a non-TPP member, the pro-TPP messaging faced internal contradictions, relied on vague pro-globalization claims such as TPP “will create jobs and open markets,” and failed to catch the public attention enough to rally constituent support for the agreement. In fact, still in August 2016, after a full year of pro-TPP messaging by the White House, 43% of Americans said they didn’t know enough about the agreement to have an opinion on whether or not they would support it (Morning Consult, 2016). Thus, Skonieczny (2016) argues that the poorly constructed pro-TPP narrative left the public debate open to stronger, simpler anti-trade messaging that came to dominate the 2016 election cycle.
The ultimate challenge to passing the TPP through Congress was the election year politics of 2016. Once the Obama administration secured trade promotion authority in August 2015, the administration appeared in a good position to secure just enough Democrats to pass TPP in the House of Representatives—Republicans for the past several decades were almost unanimously pro-free trade. However, the lack of positive messaging on the part of the pro-TPP White House combined with the anti-trade fervor of the election year presidential candidates spelled a rocky domestic climate that ultimately prevented TPP from even making it to a congressional floor vote.
U.S. election year politics tend to favor protectionist anti-trade rhetoric despite the fact that most Americans overall support free trade agreements. This was perhaps more true in 2016 than any other election year on record. With the unexpected success of anti-free trade candidates Bernie Sanders on the Democrat side and Donald Trump on the Republican side, even candidate Hillary Clinton, a TPP promoter during her Secretary of State years, switched to skepticism and ultimately rejection of the TPP during her candidacy. This had a profound impact on the American public. In May 2015, 58% of Americans said trade agreements were good for the United States. This number fell sharply during the 2016 campaign with only 45% saying trade was good for the United States a month before the 2016 election (Jones, 2017).
The greatest impact came from candidate Trump whose anti-free trade message resonated with Republican voters who historically supported free trade (Stokes, 2016). A March 2016 Pew Research Center poll found that “among registered Republican voters, Trump supporters stand out for their negative view of free trade: 67% of Trump supporters say free trade agreements have been a bad thing for the United States, while just 27% say they have been a good thing” (Stokes, 2016). In contrast, Democratic voters, who historically opposed free trade, were more optimistic about the deal. The Pew Research Center poll found that “By a 58% to 31% margin, more Clinton supporters among registered Democrats say free trade agreements have been a good thing than a bad thing for the U.S. Views among Democratic backers of Sanders are similar (55% good thing vs. 38% bad thing)” (Stokes, 2016). With the loss of Republican support and the rise of candidate Trump to the Republican nominee for president in July, President Obama faced the tough realization that despite enormous corporate support and eight long years of pro-trade lobbying, he would be unable to push Congress to bring the agreement to a vote before the end of his last term in office. The TPP never received a floor vote in Congress and was tabled until it was officially unsigned on President Trump’s first working day in office.
Despite a long and expensive lobbying campaign on the part of corporations and businesses, the TPP encountered unexpected obstacles that ultimately led to its failure in the United States. This case study of the TPP demonstrates two important findings of the literature on corporate lobbies and how they influence foreign policy. First, corporate lobbies are influential in designing, promoting, and setting the agenda for trade politics in the United States. In line with the findings of other scholars, the influence of corporate lobbying extends beyond the large amounts of money spent, and is seen in the back-room dealings and inclusion in private, secret trade negotiations not even open to elected officials. The second finding is that U.S. trade policy is unpredictable because it is subject to a myriad of domestic forces as it enters into the public realm. Thus, while Congress is arguably one of the most porous and easily targeted political bodies subject to a vast amount of lobby money, it is also subject to countervailing interests, media, and the public. And while the lobbying literature is adept at demonstrating how interest groups gain influence and access to decision making, it is less insightful about when and during which periods it will be successful in gaining the desired outcome. As the current climate of anti-free trade populism shows, trade votes may be for sale but ultimately “politics” determines whether or not there is a return on investment.
The literature on corporate lobbying and foreign policy reveals several important findings for the field of international relations. The first and most obvious finding is that corporate lobbies are prolific and likely to continue to grow in number, adept at gaining access and early influence on policy, and willing to spend vast amounts of money even if the outcome is uncertain. Without question, corporations are responsible for the vast amounts of money flooding political campaigns and lining lobbyists’ pockets worldwide. However, the second finding is less conclusive. The literature is unclear on whether or not the vast amount of corporate lobby groups or spending actually achieves outcomes. In some cases, it is evident that money bought protectionism or campaign contributions “bought” a vote. But in other cases, the results were diffuse or even examples of legislative failure. Despite billions of dollars spent to pass TPP, it failed. This indicates that an increase in case studies of particular examples are paramount for the literature and that domestic politics is messy and creates both open doors for lobbyists but also revolving doors of political whims, public opinion shifts, and advocacy group successes. A third finding of the literature is that this is an important and yet understudied area of interest group politics in international relations. The majority of interest group literature focuses on noncorporate interest groups and there is a distinct dearth in the literature on corporate lobbies and international relations. With such an important political impact worldwide, the field is ready for a more robust engagement with how and when corporations shape and influence foreign policy.
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