Loss Aversion as Motivation: The United States and Section 301 Trade Disputes

Bryan Early

Abstract: In this paper, we explore how the varying motives U.S. policymakers had in initiating Section 301 
trade disputes affected their resolve during the disputes.  Drawing on findings related to loss aversion, 
we theorize that U.S. policymakers are more resolute in pursuing preventative policies that seek to avoid 
losses than they are in pursuing promotive policies that seek to make gains.  Since U.S. policymakers have 
used Section 301 proceedings both to force states to open up their protected markets (promotive) and to 
prevent trade partners from reneging on existing agreements (preventative), clear distinctions can be drawn 
between the promotive versus preventive use of these policies. We test our theory against a rival rationalist
 alternative through conducting a pair of large-n analyses on 100 different Section 301 proceedings.  
These analyses employ both binary logistic regression and competing risks models.  The results provide 
strong support for loss aversion-based theory, revealing that American policymakers were willing to fight 
harder and hold out longer in cases with preventative objectives than they were in cases with promotive ones.  
Counter-intuitively, the study reveals that the “aggressive unilateralism” exercised by the United States in 
its use of Section 301 proceedings was most successful when used preventively.