Hostname: page-component-586b7cd67f-rcrh6 Total loading time: 0 Render date: 2024-11-26T06:19:07.111Z Has data issue: false hasContentIssue false
  • English
  • Français

From Protectionism to Regionalism: Multinational Firms and Trade-Related Investment Measures

Published online by Cambridge University Press:  20 January 2017

Kerry A. Chase
Kerry A. Chase*
Affiliation:
Tufts University
Get access Rights & Permissions [Opens in a new window]

Abstract

Trade-related investment measures (TRIMs) have been a key issue in regional and multilateral trade negotiations, but they have received little attention in theoretical work to date. This article analyzes the political economy of TRIMs to illuminate why regional arrangements have been a popular framework for eliminating them. The main argument is that multinational firms often demand safeguards when TRIMs are being liberalized, particularly if they have large sunk costs due to asset specificity. In general, regional arrangements are better equipped than multilateral rules to incorporate the safeguards these firms demand: regionalism requires governments to make binding commitments, and it creates opportunities to discriminate against outsiders. A case study of lobbying by U.S. companies with FDI in Canada from the early twentieth century to the negotiation of the Canada-United States Free Trade Agreement illustrates these points. The article concludes that regional arrangements are likely to remain more active, and more successful, than multilateral discussions in managing the commitment problems inherent in liberalizing TRIMs.

Keywords

Trade-related investment measuresforeign direct investmentregional trading arrangementsWorld Trade Organization
Type
Research Article
Information
Business and Politics , Volume 6 , Issue 2 , August 2004 , pp. 1 - 36
Copyright
Copyright © V.K. Aggarwal 2004 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abbott, Frederick M. 2000. “NAFTA and the Legalization of World Politics: A Case Study.” International Organization 54 (3): 519–547.Google Scholar
Balasubramanyam, V. N. 1991. “Putting TRIMs to Good Use.” World Development 19 (9): 1215–1224.Google Scholar
Bernard, Mitchell and Ravenhill, John. 1995. “Beyond Product Cycles and Flying Geese: Regionalization, Hierarchy, and the Industrialization of East Asia.” World Politics 47 (2): 171–209.Google Scholar
Brewer, Thomas L., and Young, Stephen. 1998. “Investment Issues at the WTO: The Architecture of Rules and the Settlement of Disputes.” Journal of International Economic Law 1 (3): 457–470.Google Scholar
Caves, Richard E. 1996. Multinational Enterprise and Economic Analysis, 2nd ed. Cambridge: Cambridge University Press.Google Scholar
Chase, Kerry A. 2003. “Economic Interests and Regional Trading Arrangements: The Case of NAFTA,” International Organization 57 (1): 137–174.Google Scholar
Cooper, Richard N. 1972. “Economic Interdependence and Foreign Policy in the Seventies.” World Politics 24 (2): 159–181.Google Scholar
Daly, D.J., MacCharles, and D.C. 1986. Canadian Manufactured Exports: Constraints and Opportunities. Montreal: Institute for Research on Public Policy.Google Scholar
De Melo, Jaime, Panagariya, Arvind, and Rodrik, Dani. 1993. “The New Regionalism: A Country Perspective.” In New Dimensions in Regional Integration, edited by de Melo, Jaime and Panagariya, Arvind. Cambridge: Cambridge University Press.Google Scholar
Dykes, James G. 1982. Background on the Automotive Products Trade Act. Toronto: Motor Vehicle Manufacturers Association.Google Scholar
Eastman, H.C., Stykolt, and S. 1967. The Tariff and Competition in Canada. Toronto: Macmillan.Google Scholar
Federal Task Force on the Canadian Motor Vehicle and Automotive Parts Industries. 1983. An Automotive Strategy for Canada.Google Scholar
Frieden, Jeffry A. 1991. Debt, Development, and Democracy: Modern Political Economy and Latin America, 1965–1985. Princeton: Princeton University Press.Google Scholar
Frieden, Jeffry, and Martin, Lisa L. 2002. “International Political Economy: Global and Domestic Interactions.” In Political Science: The State of the Discipline, edited by Katznelson, Ira and Milner, Helen. New York: W.W. Norton.Google Scholar
Fuss, Melvyn, and Waverman, Leonard. 1987. “A Sectoral Perspective: Automobiles.” InGoogle Scholar
Perspectives on a U.S.-Canadian Free Trade Agreement, edited by Stern, Robert M., Trezise, Philip H. and Whalley, John. Washington, DC: Brookings Institution.Google Scholar
Graham, Edward M., and Krugman, Paul R. 1990. “Trade-Related Investment Measures.” In Completing the Uruguay Round: A Results-Oriented Approach to the GATT Trade Negotiations, edited by Schott, Jeffrey J. Washington, DC: Institute for International Economics.Google Scholar
Granatstein, J.L. 1985. “Free Trade between Canada and the United States: The Issue That Will Not Go Away.” In The Politics of Canada's Economic Relationship with the United States, edited by Stairs, Denis and Winham, Gilbert R. Toronto: University of Toronto Press.Google Scholar
Gray, Herb. 1972. Foreign Direct Investment in Canada. Ottawa: Information Canada.Google Scholar
Greenaway, David. 1992. “Trade Related Investment Measures and Development Strategy.” Kyklos 45 (2): 139–159.Google Scholar
Grossman, Gene M. 1981. “The Theory of Domestic Content Protection and Content Preference.” Quarterly Journal of Economics 96 (4): 583–603.Google Scholar
Guisinger, Stephen E. 1986. “Do Performance Requirements and Investment Incentives Work?” World Economy 9 (1): 79–96.Google Scholar
Guisinger, Stephen E. 1985. Investment Incentives and Performance Requirements: Patterns of International Trade, Production, and Investment. New York: Praeger Publishers.Google Scholar
Haas, Ernst B. 1958. The Uniting of Europe. Stanford: Stanford University Press.Google Scholar
Haas, Ernst B. 1970. “The Study of Regional Integration: Reflections on the Joy and Anguish of Pre-Theorizing.” International Organization 24 (4): 607–646.Google Scholar
Haggard, Stephan. 1997. “The Political Economy of Regionalism in Asia and the Americas.” In The Political Economy of Regionalism, edited by Mansfield, Edward D. and Milner, Helen. New York: Columbia University Press.Google Scholar
Hefeker, Carsten, and Gros, Daniel. 2000. “The Dynamics of Trade Integration and the Political Value of Commitment.” Oxford Economic Papers 52 (2): 398–414.Google Scholar
Horstmann, Ignatius J., and Markusen, James R. 1986. “Up the Average Cost Curve: Inefficient Entry and the New Protectionism.” Journal of International Economics 20 (3–4): 225–247.Google Scholar
Hufbauer, Gary Clyde, and James Samet, Andrew. 1982. “Investment Relations between Canada and the United States.” In Canada and the United States: Dependence and Divergence, edited by Armstrong, Willis C., Armstrong, Louise S. and Wilcox, Francis O. Cambridge: Ballinger Publishing Co.Google Scholar
Hufbauer, Gary Clyde, and Schott, Jeffrey J. 1992. North American Free Trade: Issues and Recommendations. Washington, DC: Institute for International Economics.Google Scholar
Kahler, Miles. 2000. “Legalization as Strategy: The Asia-Pacific Case.” International Organization 54 (3): 549–571.Google Scholar
Keohane, Robert O. 1984. After Hegemony: Cooperation and Discord in the World Economy. Princeton: Princeton University Press.Google Scholar
Krasner, Stephen D., ed. 1983. International Regimes. Ithaca: Cornell University Press.Google Scholar
Low, Patrick, and Subramanian, Arvind. 1996. “Beyond TRIMs: A Case for Multilateral Action on Investment Rules and Competition Policy?” In The Uruguay Round and the Developing Countries, edited by Martin, Will and Alan Winters, L. Cambridge: Cambridge University Press.Google Scholar
Maggi, Giovanni, and Rodriguez-Clare, Andres. 1998. “The Value of Trade Agreements in the Presence of Political Pressures.” Journal of Political Economy 106 (3): 574–601.Google Scholar
Marshall, Herbert Jr. Southard, Frank A., and Taylor, Kenneth W. 1936. Canadian-American Industry: A Study in International Investment. New Haven: Yale University Press.Google Scholar
Maskus, Keith E., and Eby, Denise R. 1993. “Developing New Rules and Disciplines on Trade-Related Investment Measures.” In The Multilateral Trading System: Analysis and Options for Change, edited by Stern, Robert M. Ann Arbor: University of Michigan Press.Google Scholar
Mattli, Walter. 1999. The Logic of Regional Integration: Europe and Beyond. New York: Cambridge University Press.Google Scholar
Milner, Helen V. 1988. Resisting Protectionism: Global Industries and the Politics of International Trade. Princeton: Princeton University Press.Google Scholar
Moran, Theodore H. 1998. Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition. Washington, DC: Institute for International Economics.Google Scholar
Moran, Theodore H. 2000. “Investment Issues.” In The WTO after Seattle, edited by Schott, Jeffrey J. Washington, DC: Institute for International Economics.Google Scholar
Moran, Theodore H. 2001. Parental Supervision: The New Paradigm for Foreign Direct Investment and Development. Washington, DC: Institute for International Economics.Google Scholar
Moravcsik, Andrew. 1998. The Choice for Europe: Social Purpose and State Power from Messina to Maastricht. Ithaca: Cornell University Press.Google Scholar
Mutti, John. 1994. “TRIMs, Policy Change, and the Role of the GATT.” In Analytical and Negotiating Issues in the Global Trading System, edited by Deardorff, Alan V. and Stern, Robert M. Ann Arbor: University of Michigan Press.Google Scholar
Noble, Gregory W. 2001. “Congestion Ahead: Japanese Automakers in Southeast Asia.” Business and Politics 3 (2): 157–184.Google Scholar
O'Keefe, Thomas A. and Haar, Jerry. 2001. “The Impact of Mercosur on the Automobile Industry.” North-South Agenda Papers No. 50, University of Miami.Google Scholar
Parliament of Canada, Standing Senate Committee on Foreign Affairs. 1982. Canada-United States Relations, Vol. 2: Canada's Trade Relations with the United States.Google Scholar
Raby, Jean. 1990. “The Investment Provisions of the Canada-United States Free Trade Agreement: A Canadian Perspective.” American Journal of International Law 84 (2): 394–443.Google Scholar
Radosh, Ronald. 1967. “American Manufacturers, Canadian Reciprocity, and the Origins of the Branch Factory System.” CAAS Bulletin 3 (1): 19–54.Google Scholar
RG 20. Records of the Office of the Special Adviser to the President on Foreign Trade (SAFT). U.S. National Archives.Google Scholar
RG 59. General Records of the Department of State. U.S. National Archives.Google Scholar
RG 489. Records of the International Trade Administration. U.S. National Archives.Google Scholar
Rodrik, Dani. 1987. “The Economics of Export-Performance Requirements.” Quarterly Journal of Economics 102 (3): 633–650.Google Scholar
Rodrik, Dani. 1989. “Promises, Promises: Credible Policy Reform via Signaling.”Google Scholar
Economic Journal 99 (397): 756–772.Google Scholar
Royal Commission on the Automotive Industry. 1961. Report of the Royal Commission on the Automotive Industry.Google Scholar
Royal Commission on the Economic Union. 1985. Report of the Royal Commission on the Economic Union and Development Prospects for Canada, vol. I.Google Scholar
Safarian, A.E. 1966. Foreign Ownership of Canadian Industry. Toronto: McGraw-Hill.Google Scholar
Scheinberg, Stephen. 1973. “Invitation to Empire: Tariffs and American Economic Expansion in Canada.” Business History Review 47 (2): 218–238.Google Scholar
Sidak, J. Gregory, and Spulber, Daniel F. 1997. Deregulatory Takings and the Regulatory Contract: The Competitive Transformation of Network Industries in the United States. Cambridge: Cambridge University Press.Google Scholar
Staiger, Robert W., and Tabellini, Guido. 1987. “Discretionary Trade Policy and Excessive Protection.” American Economic Review 77 (5): 823–837.Google Scholar
Task Force on the Structure of Canadian Industry. 1968. Foreign Ownership and the Structure of Canadian Industry.Google Scholar
Tirole, Jean. 1999. “Incomplete Contracts: Where Do We Stand?” Econometrica 67 (4): 741–781.Google Scholar
Tornell, Aaron. 1991. “Time Inconsistency of Protectionist Programs.” Quarterly Journal of Economics 106 (3): 963–974.Google Scholar
Tornell, Aaron, and Esquivel, Gerardo. 1997. “The Political Economy of Mexico's Entry into NAFTA.” In Regionalism versus Multilateral Trade Arrangements, edited by Ito, Takatashi and Krueger, Anne O. Chicago: University of Chicago Press.Google Scholar
Traves, Tom. 1984. “The Political Economy of the Automobile Tariff, 1926–31.” In Essays in Canadian Business History, edited by Traves, Tom. Toronto: McClelland and Stewart.Google Scholar
UNCTAD. 1991. The Impact of Trade-Related Investment Measures on Trade and Development: Theory, Evidence, and Policy Implications.Google Scholar
UNCTAD. 1999. Investment-Related Trade Measures.Google Scholar
U.S. Department of Commerce, Bureau of Foreign and Domestic Commerce. 1931. American Branch Factories Abroad.Google Scholar
U.S. Department of State. 2001. Foreign Relations of the United States, 1964–68, vol. XXII.Google Scholar
U.S. House of Representatives, Committee on Ways and Means. 1965. United States-Canada Automotive Products Agreement.Google Scholar
U.S. House of Representatives, Committee on Ways and Means. 1988. United States-Canada Free Trade Agreement.Google Scholar
U.S. Senate, Committee on Finance. 1986. Negotiation of United States-Canada Free Trade Agreement.Google Scholar
U.S. Senate, Committee on Finance. 1987. Data and Materials Related to United States-Canada Free Trade Negotiations.Google Scholar
U.S. Tariff Commission. 1920. Reciprocity with Canada: A Study of the Arrangement of 1911. Google Scholar
Whalley, John. 1998. “Why Do Countries Seek Regional Trade Agreements?” In The Regionalization of the World Economy, edited by Frankel, Jeffrey A. Chicago: University of Chicago Press.Google Scholar
Wilkins, Mira, and Ernest Hill, Frank. 1964. American Business Abroad: Ford on Six Continents. Detroit: Wayne State University Press.Google Scholar
Wilkinson, Bruce W. 1968. Canada's International Trade: An Analysis of Recent Trends and Patterns. Montreal: Private Planning Association of Canada.Google Scholar
Williams, Glen. 1986. Not for Export: The International Competitiveness of Canadian Manufacturing, 2nd ed. Toronto: McClelland and Stewart.Google Scholar
Williamson, Oliver O. 1985. The Economic Institutions of Capitalism: Firms, Markets, and Relational Contracting. New York: The Free Press.Google Scholar
Wolman, Paul. 1992. Most Favored Nation: The Republican Revisionists and U.S. Tariff Policy, 1897–1912. Chapel Hill: University of North Carolina Press.Google Scholar
Wonnacott, Paul. 1988. “The Auto Sector.” In The Canada-United States Free Trade Agreement, edited by Schott, Jeffrey J. and Smith, Murray G. Washington, DC: Institute for International Economics.Google Scholar
Yarbrough, Beth V., and Yarbrough, Robert M. 1992. Cooperation and Governance in International Trade. Princeton: Princeton University Press.Google Scholar
Yoshimatsu, Hidetaka. 2002. “Preferences, Interests, and Regional Integration: The Development of the ASEAN Industrial Cooperation Arrangement.” Review of International Political Economy 9 (1): 123–149.Google Scholar