View Complete 2011 Structural Cost Report 
Summary
Foreword
Chapter 1 - Raw Cost Index
Chapter 2 - Corporate Tax Rates
Chapter 3 - Employee Benefits
Chapter 4 - Tort Costs
Chapter 5 - Energy Costs
Chapter 6 - Pollution Abatement Costs



The trade-weighted foreign tort cost advantage was 1.6 percentage points in the 2011 cost study (just under 10 percent of the entire structural cost gap).

  • Due to the fact that a rigorous international comparison of costs has not been done since the first cost study, the results assume that tort costs in other countries have not changed significantly in the 2000s. A thorough literature review of tort developments in Europe and elsewhere in the industrialized world undertaken prior to each cost study update broadly supports making this assumption, but it remains an assumption.

 

  • Unlike taxes and employee benefits, this foreign advantage has narrowed steadily since the 2006 cost study. Commercial tort costs in the United States have decreased by 12 percent from their 2004 peak of $173.5 billion. In the context of growing manufacturing output, the share of manufacturing value-added devoted to litigating tort claims fell to 2.9 percent in the 2011 cost study, compared to a peak estimated at nearly 5 percent.

 

  • This decline can in large part be credited to the Class Action Fairness Act, enacted in 2005, which reduced financial incentives for filing large class action suits and cracked down on “jurisdiction-shopping” for plaintiff-friendly court districts (see details in 2006 cost study p. 12 and 2008 cost study pp. 9-11).

 

  • Nevertheless, the fact remains that the U.S. tort system is fundamentally different from most systems elsewhere in the industrialized world in that each party pays its own legal costs. In almost all other countries, plaintiffs must pay all or part of the defendant’s legal costs in case of judgment in the defendant’s favor. Because of the strong disincentives for groundless lawsuits in such systems, it is unlikely that the foreign advantage will disappear entirely without more fundamental changes to the incentive structure in the current U.S. system.


 

Tort Costs (Foreign Advantage)

Canada
Mexico
Japan
China
Germany
United Kingdom
Korea
Taiwan
France
Average of 9 partners
2003
3.1
N/A
3.3
N/A
0.7
3.4
N/A
N/A
1.3
3.2
2006
3.2
4.4
3.2
4.4
2.5
3.5
4.4
4.4
3.5
3.7
2008
2.9
3.2
3.1
3.2
0.5
3.2
3.2
3.2
1.1
2.9
2011
1.6
1.8
1.7
2.3
-0.8
1.8
2.3
2.3
-0.3
1.6
Increased Foreign Advantage
2006-2011
-1.6
-2.5
-1.5
-2.0
-3.3
-1.6
-2.0
-2.0
-3.7
-2.1

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