European trade offices: Promoting exports and attracting investments

How do states go about their goals of amplifying European trade ties? How does this relate to the TTIP? In my study, I argue that business-related linkages in transatlantic trade promotion are the most important direct connection that states have to Europe and I show that some state officials have used trade promotion arguments when speaking out on the TTIP.
For decades, state governments have been seeking investments from Europe and attempting to increase exports to Europe. This is a concerted effort, guided largely out of the state executive. 40 percent of the people I interviewed for my study said that trade promotion takes precedence over trade policy. More than half noted that overall, economic concerns are the most important driver of states’ engagement in Europe.
Trade offices in Europe are the physical representation of this state governmental priority on trade promotion, which is a case of parallel interest representation. This means that U.S. federal states’ connections to global actors happen without interaction with the U.S. federal government.

Trade missions to Europe are conducted by the governor, the lieutenant governor and/or other administration officials with the express purpose of promoting the state to European businesses, both regarding exports and investment. They are not policy-oriented, even if governors at times do meet with foreign political officials. A few transatlantic examples will highlight the trajectory of such trade missions:

  • The 2013 trip by Missouri Governor Jay Nixon exemplifies the priorities of European travels: He went to multiple countries (Belgium, France, United Kingdom), brought along many more business representatives than government officials and proclaimed the goals to be “connecting Missouri businesses with customers in foreign markets and attracting new investments”.1Office of Missouri Governor Jay Nixon, 2013 While Nixon did meet with British government officials as well as U.S. embassy personnel, most of his meetings were with European businesses, trade associations or the respective American chambers of commerce.
  • Maine’s Governor Paul LePage traveled to Iceland and the United Kingdom in 2014 with the aim of promoting specific industry sectors, focusing on ocean-related business and life sciences in Iceland and on food and offshore energy in the United Kingdom. This trip was partly prompted by an investment an Icelandic shipping company had made in Maine.
  • In 2015, Governor Gary Herbert of Utah went to five European countries, meeting with businesses, U.S. diplomats and trade associations to promote Utah’s industry. His European visits stick out because they also included discussions with political actors in Brussels.

Overall, respondents involved in the organization of trade missions to Europe, mainly from the state executives and the European offices, stressed economic over political contacts. Export promotion and investment attraction are the primary reasons for governors to embark on overseas trips, while policy-related discussions are a bonus at best.

States’ European trade representative offices are the direct and permanent connection state executives have to European actors and are thus crucial examples of parallel interest representation. They are institutionalized, working-level representations of the state in Europe to attract investment and promote exports. Trade missions have similar goals but are usually short-term, high-profile engagements with European businesses. Nevertheless, trade missions are also an important part of states’ transatlantic trade relations, so I will briefly highlight some points regarding such travels before turning to the representative offices.

How many states have offices in Europe? And where are they?

The overseas offices follow this mold of prioritizing business links over policy connections. As a permanent manifestation of states’ emphasis on transatlantic trade promotion, the state offices abroad have garnered a reasonable amount of scholarly attention since their inception in the 1960s. In 1953, New York became the first state to open an office abroad and it chose a European location. The office was dedicated to attracting investment and promoting exports and tourism. While in 1970, four states had offices overseas2Fry, Earl H. (1990). The United States of America. In H. J. Michelmann & P. Soldatos (Eds.), Federalism and international relations: The role of subnational units (pp. 276-298). Oxford: Clarendon Press. Here: p. 281, when I researched for my study in 2016-2017, there were 196 offices in 27 countries operated by 41 states.
In the EU, 27 U.S. states maintain 49 offices for solely economic purposes, namely attracting foreign direct investment and promoting exports. These offices are located in eight EU member states (Belgium, the Czech Republic, France, Germany, Italy, the Netherlands, Spain and the United Kingdom). 17 U.S. states are members of the CASE (see map below), which is the Council of American States in Europe, a loose network of official state representatives on the continent.
Yet, it has to be noted that not all European state offices are part of the CASE: For example, New York has an office in London but is not a member of the CASE. Also, states may not be a CASE member or have an office anywhere in Europe but may still be actively engaged in European interest representation. This was found to be the case for California and Tennessee, for example. They have successfully engaged with European state and nonstate actors to represent their interests in the field of climate change policy and foreign direct investment in the car industry, respectively.

Foreign direct investment is a particular focus of the U.S. states’ economic development strategies partly because there is stiff interstate competition for FDI, which has been studied in a multitude of scholarly works. Authors have noted how states engage in bidding wars for foreign direct investment, mainly from Europe but also from Japan, with good and bad consequences for the states. In many cases, governors travel to Europe to meet with businesses or business associations, sometimes also talking to regional-level or national-level politicians about the prospective deal. One example from Tennessee illustrates this point: In order to woo the German carmaker Volkswagen to the state, top Tennessee lawmakers from local, state and federal government held multiple personal talks with Volkswagen executives in Tennessee, visited Germany on publicized trade missions, presented aggressive and record-setting tax incentives comprised of local, state and federal money and mustered a strong marketing effort for the proposed factory site itself.3Wang, Herman, Dave Flessner, Andy Sher & Mike Pare. (2008, August 3). “Choo Choo” hit right note with Volkswagen officials. Chattanooga Times Free Press. Retrieved
November 10, 2015, from http://www.knoxnews.com/business/choo-choo-hit-rightnote-volkswagen-officials.
Tennessee did, in the end, land the contract with Volkswagen.

Number and locations of state offices in Europe and Washington, D.C.

Notes: The flag denotes that a state has a trade office in that country. A star denotes that the state maintains an office in Washington, D.C. An underline under the state abbreviation denotes that the state is a member of the CASE (West Virginia’s Europe office is in Zurich, Switzerland, so it was not counted for this EU-focused overview). Map template created with Datawrapper. Office locations taken from governors’ official websites in 2016-2017.
With their focus on FDI attraction and export promotion, states’ offices in Europe serve a different purpose than the offices that some states maintain in the national capital Washington, D.C. (denoted by a star in the map). As explained in depth in the literature4Jensen, Jennifer M. (2016). The Governors’ Lobbyists. Federal-State Relations Offices and Governors Associations in Washington. Ann Arbor: University of Michigan Press;  Nugent, John. (2009). Safeguarding Federalism: How States Protect Their Interests in National Policymaking. Norman: University of Oklahoma Press. Here: pp. 126-133., these D.C. offices are outposts of the states to monitor and influence federal legislation. One respondent explained that the task of the state’s D.C. office was to facilitate interaction between the governor and the U.S. Congress, the administration and, at times, international representatives such as embassy officials. Nevertheless, it is interesting to note that more U.S. states have representative offices in the EU than do in Washington, D.C.: 27 states operate 49 offices in the EU, while 26 states maintain offices in the national capital.
The offices states keep abroad are used to spotlight their strategic location, their highly skilled workforce, their infrastructure or their low tax rates with the goal of attracting European businesses. Many studies have confirmed that economic reasons in the form of FDI and export promotion are the main impetus for states to open offices abroad, thus underlining the overwhelming importance of economic matters for the U.S. states in international affairs.

How states' EU offices are structured and what they do

The representative trade offices in Europe are either staffed by full-time state officials or by contracted consultant staff. Full-time state officials always work for only one state. Consultants may have other clients, sometimes even other states. In most cases, the offices in Europe are rather small, staffed by one or two people. With this study’s focus on trade policy, I will not dive into detailed descriptions of the trade promotion activities by the offices abroad. Instead, I will briefly outline the most important tasks and then present the offices’ connections to the TTIP.
Offices’ daily tasks are dominated by the search for potential investors from Europe that are considering or might consider branching out to the U.S. Such investments range from a single sales representative in a state to the construction of a big factory with thousands of employees. In their quest for FDI, states go to great lengths to market what they perceive to be unique traits and benefits of their economic environment. They aim to tell a story of their state and workforce, frequently focusing their marketing efforts on a set number of industries based on in-state economic priorities. For instance, respondents from a Midwestern state explained how six industry clusters guide their work to find investors and importers in Europe. In a Northeastern state, the government markets the high density of universities to show the well-educated workforce and the possibility for research cooperation.

Got questions or feedback?

If you have comments or questions, please feel free to get in touch via e-mail at research@transatlanticties.com (PGP-Key).

From the analysis of office locations, it becomes obvious that proximity to Europe is the major factor driving establishment of an office in the EU. Only five Western states (Colorado, Nevada, Oregon, Utah and Washington) have offices in the EU. In contrast, of the 14 East Coast states with access to the Atlantic, nine are represented in Europe with offices, along with several states from the Midwest and South. Interviewees did not directly mention proximity to Europe as a deciding factor for opening an office, but this topic did come up indirectly: When respondents elaborated on how European companies select sites for future investment, they described how closeness to Europe, preferably in states within the Eastern time zone and with direct flights to Europe, are important aspects for European investors. Considering their potential investors’ preferences, it is therefore reasonable for states closer to Europe to set up offices on the continent.
In the context of multilayered interest representation, the European offices are examples of parallel interest representation: They are set up with no state-federal interaction and with no oversight by the federal administration. States act on their own regarding their European trade promotion and FDI attraction but in harmony with the federal government.

Trade policy issues are not the main concerns of states' EU offices

Because offices in Europe are typically steered by the state economic development agencies, these executive agencies have become important transatlantic actors. However, their roles should not be exaggerated beyond a strict economic and investment perspective. Some researchers’ expectations to that effect have not come to fruition. Political scientist John Kincaid in 1993 said that U.S. states were concerned about the EU’s economic policies and “[h]ence, about twenty-eight states have offices or representatives in EC member-states, thirteen of which are in Brussels”.5Kincaid, John. (1993). Consumership versus citizenship: is there wiggle room for local regulation in the global economy? In B. Hocking (Ed.), Foreign Relations and Federal States (pp. 27-47). London: Leicester University Press. Here: p. 35. International studies scholar Frances Oneal in 1993 suggested that state development agencies, especially via their European offices, might serve critical policy-making roles in transatlantic economic policy as mini-embassies on the continent.6Oneal, Frances H. (1993). U.S. State Government Responses to EC-1992: A Survey of State Development Agencies. In D. L. Smith & J. L. Ray (Eds.), The 1992 project and the future of integration in Europe (pp. 164-178). Armonk: M.E. Sharpe. Here: p. 176.

Jumping from states opening representative offices to states being interested in EU policies was probably not even accurate in the early 1990s, but it certainly is not today. A while later, international relations scholars Brian Hocking and Michael Smith presented the results of their study on states’ overseas offices and concluded that “all the available evidence suggests that their policy role is negligible and that a direct EC-state linkage has not formed a significant element in the interactions generated by the [European single market]”.7Hocking, Brian & Michael Smith. (1997). Beyond Foreign Economic Policy: The United States, the Single European Market and the Changing World Economy. London: Pinter. Here: p. 115. This assessment is confirmed by my research. The state offices, as various interviews and conversations at a conference for these offices revealed, do not have policy-making responsibilities or capabilities. They are meant solely as economic development outposts. Furthermore, there is only one office left in Brussels, the seat of many of the EU’s institutions, whereas most trade offices are now in Germany (21 offices), the EU’s biggest economy.

One interviewee, a state official in Europe, stressed that they are not even allowed to talk to European politicians). The workload was described as 60 percent FDI attraction and 40 percent export promotion (this number went as high as 95 percent FDI attraction for another respondent in Europe). Requests from European politicians to the state’s office in Europe must be sent to the state-side government liaison office, according to a prescribed protocol. Such contact requests, however, are very rare. Even if U.S. state politicians do approach the European outpost, this contact is always conducted under the official umbrella of the state-side agency.
A strict nonpolitical role for the European offices is not every state’s strategy. Another interviewee, also working for a U.S. state in Europe, explained how the office is sometimes occupied with helping to coordinate gubernatorial visits to Europe. The EU-based state office is in charge of organizing appointments with politicians. Typically, the respondent reported, these appointments are with national governmental actors and national business associations, not EU officials or noncentral governmental actors. For instance, the interviewee recalled a European trade mission the governor embarked on for which the representative office arranged meetings in the German national-level ministries, with members of the German national parliament and representatives of German national business associations. In this way, the state development agencies and their Europe-based colleagues do at least facilitate transatlantic policy making, even though they are not actively engaged in it. Another respondent also described organizing a gubernatorial delegation to Europe but stressed that it was entirely focused on meeting potential investors: No politicians were met and no photo-ops granted, the agenda only saw the governor meeting with business leaders.
Number of U.S. state that had overseas offices in 1970
Number of U.S. state that had overseas offices in 2016

Monitoring of EU, European national-level or European regional-level politics is not part of the offices’ work description. Upon request, the Europe-based staff might provide some commentary on European political affairs, for example in the regularly scheduled phone calls with the state-side base. In these cases, political intelligence is put into a business and investment perspective. Only if political issues touch upon potential investors, officials in Europe see a responsibility to relay such information. One example given was the topic of double taxation. A Spanish company’s subsidiary in the U.S. was taxed both in Spain and the U.S. The company did not like this arrangement and argued that it could invest more in the state, if it paid less taxes, so the governor of the state, where the subsidiary was located, brought this issue to the attention of the state’s congressional delegation.

The core topic of my study, the TTIP, is another politically important issue that European state representatives might inform their contacts in the U.S. about occasionally, but it does not feature prominently in their work. The proposed agreement is known amongst state officials working in Europe and recognized as a high-priority transatlantic policy issue. The interviewees from the European offices stressed the significance of transatlantic trade relations but with a view towards their core business, FDI and exports: The transatlantic trade and investment relationship is crucial for the states maintaining offices in Europe, often outnumbering trade ties to other regions of the world by a longshot. For many states, the EU is the top destination for state exports and top source for FDI (see the post on FDI statistics). As an example, respondents working for a state in Europe recounted how in 2015, 58 companies from the state visited Europe for trade shows to increase their exports and how no other region in the world created nearly as much interest.

Against this backdrop, the impact of the proposed TTIP on states’ transatlantic relations in general is acknowledged. The impact on the state officials’ daily work, however, is negligible: The states’ European offices do not deal with the TTIP as part of their core agenda. Again, the representative offices are tasked with FDI attraction and not with providing political analysis or policy-making support and certainly not with directly or indirectly engaging in the negotiations.

Yet, the importance of the proposed agreement reverberates in the states’ offices abroad, too. Similar to the earlier example of double taxation, state offices abroad view the TTIP from European companies’ perspectives and how it might affect their investment decision. Whatever affects or drives a potential investor’s decision-making process matters to the state officials abroad. One official in Europe explained this circumstance:

I sense how important it [the TTIP] is for German small and medium-sized enterprises, what a big topic it is for them. (…) And, of course, the Americans need to know that it’s such a big topic for German companies.

This state official therefore informed contacts in the U.S. state of the importance of the public and political debate surrounding the TTIP in Germany, so that the economic development team would be prepared if this topic ever came up. The Europe-based state official thus functions as an antenna, which can detect important issues on one side of the Atlantic and transmit it to the other.

In 2015, Christian Schmidt, Federal German Minister for Agriculture, stated that some geographical indications (GIs) might not be valid under the TTIP. In essence, he suggested that anyone could claim to make original Nuremberg bratwursts. This prompted he head of a German food lobbying group to say that he did not want Nuremberg bratwursts from Kentucky.8fdi/AFP/dpa. (2015, January 5). Reaktion auf Agrarminister Schmidt: “Wir wollen keine Nürnberger Rostbratwürste aus Kentucky”. Spiegel Online. Retrieved August 18, 2016, from http://www.spiegel.de/wirtschaft/service/ttip-lebensmittelherstellerkritisieren-agrarminister-schmidt-a-1011227.html.

While the debate itself was a media spectacle more than an actual policy discussion, the larger issue of the treatment of GIs has been a matter of high concern for the U.S. and the EU in the negotiations. Kentucky’s economic development department, with support from the European office, subsequently got in touch with the Federation of German Food and Drink Industries to point out that the TTIP also holds advantages for German food and drink producers by expanding access to the big U.S. market. What came of this intervention was a country profile of the U.S. market in Germany’s biggest industry news magazine for food and drinks, an interview with the Kentucky governor in a nation-wide German publication9Dierig, Carsten. (2015, February 9). Kentucky Fried Chlorhühnchen. Die Welt. Retrieved August 18, 2016, from http://www.welt.de/print/die_welt/wirtschaft/article137251314/Kentucky-FriedChlorhuehnchen.html. and, from a theoretical perspective, further proof that the state offices abroad can function as antennas for their economic development agencies.

The results from studying the representative office’s tasks and interviewing their officials reveal that states engage in parallel interest representation: They seek direct contacts to European companies without any interaction with the federal government. This parallel interest representation is largely nonconflictual, though, as the states enjoy the freedom to pursue FDI and promote exports largely as they wish. Establishing offices abroad and having them work in trade promotion is the most visible proof for states’ parallel interest representation in trade promotion. The motivation is clearly economically driven, against the backdrop of interdependent global markets.