European trade offices: Promoting exports and attracting investments
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?
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.
How states' EU offices are structured and what they do
Trade policy issues are not the main concerns of states' EU offices
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.
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.
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.
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.