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Anticipating exclusion: Global supply chains and Chinese business responses to the Trans-Pacific Partnership

Published online by Cambridge University Press:  30 July 2019

Robert Gulotty  and
Xiaojun Li
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Abstract

Preferential trade agreements (PTAs) promise exclusive access for their members at the expense of excluded parties. But what does this exclusivity mean for firms in nonmember states if production networks are internationally organized? This paper analyzes the effect of PTA exclusion on firms embedded in the global supply chains, focusing on the case of China's exclusion from the Trans-Pacific Partnership (TPP). Drawing on a survey of Chinese firm managers during the TPP negotiations, we find that productive and downstream firms anticipated the exclusion and made adjustments accordingly, which led to a general sense of optimism toward the agreement. When presented with the prospect of an expanded TPP, however, firms are divided depending on how their own positions in the global supply chain complement or compete with the new member. These findings, validated with interviews in the field, suggest that the effects of PTA exclusion depend on the ability and need for firms to adjust. As a result, exclusion does not equate to an unalloyed loss for excluded firms.

Keywords

preferential trade agreementglobal supply chainChinaTrans-Pacific Partnershiptrade diversion
Type
Research Article
Information
Business and Politics , Volume 22 , Issue 2 , June 2020 , pp. 253 - 278
Copyright
Copyright © V.K. Aggarwal 2019 and published under exclusive license to Cambridge University Press

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Footnotes

†

This article grew out of a conference on China and Regional Integration at the 2015 Summer Institute on International Relations, funded by the Chicago Project on Security and Terrorism (CPOST), the Peking University School of International Studies, and the University of Chicago Beijing Center. Funding for this research is supported by the UBC Hampton Research Endowment Fund (F14-01146). We benefited from comments from the participants of the International Political Economy Society annual meeting in 2015. We would like to thank Quinn Marschik for research assistance.

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