Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-31T15:09:00.895Z Has data issue: false hasContentIssue false
  • English
  • Français

Protection forestall: Offshore firms against tariffs in their own industry

Published online by Cambridge University Press:  27 September 2022

Jieun Lee Open the ORCID record for Jieun Lee [Opens in a new window]  and
Iain Osgood Open the ORCID record for Iain Osgood [Opens in a new window]
Jieun Lee*
Affiliation:
Department of Political Science, University at Buffalo, State University of New York, Buffalo, NY 14260, USA
Iain Osgood
Affiliation:
Department of Political Science, University of Michigan, Ann Arbor, MI 48104, USA
*
*Corresponding author: Jieun Lee, Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Firms that offshore final production should oppose trade barriers “protecting” their own industry. This pits them against onshore firms, especially when comparative disadvantage is most pronounced, and so fundamentally alters trade policy coalitions. The US-China trade war's exclusion process, where US firms could request that tariffs not be applied to a product, provides a golden opportunity to test this contention. We show that coverage by a tariff in the trade war and firm characteristics associated with offshoring—size, multinationality, and heavy imports from China—interacted to generate firm requests for exclusion from the trade war's tariffs. This finding is robust to input-sourcing and fears of export retaliation as alternative explanations, and across multiple measures of firm size, tariff coverage, and exclusion requests. We therefore test a key piece of the firm-centered model of trade politics and show its value in interpreting the US-China trade war.

Type
Research Article
Information
Business and Politics , Volume 24 , Special Issue 4: U.S.-China Trade War , December 2022 , pp. 377 - 398
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press on behalf of V.K. Aggarwal

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

Ahn, Dukgeun, and Lee, Jieun. 2011. “Countervailing Duty against China: Opening a Pandora's Box in the WTO System?” Journal of International Economic Law 14 (2): 329–68.CrossRefGoogle Scholar
Anderer, Christina, Dür, Andreas, and Lechner, Lisa. 2020. “Trade Policy in a GVC World: Multinational Corporations and Trade Liberalization.” Business and Politics 22 (4): 639–66.CrossRefGoogle Scholar
Antras, Pol, and Helpman, Elhanan. 2004. “Global Sourcing.” Journal of Political Economy 112 (3): 552–80.CrossRefGoogle Scholar
Autor, David H., Dorn, David, and Hanson, Gordon H.. 2016. “The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade.” Annual Review of Economics 8: 205–40.CrossRefGoogle Scholar
Baccini, Leonardo, Guidi, Mattia, Poletti, Arlo, and Yildirim, Aydin B.. 2022. “Trade Liberalization and Labor Market Institutions.” International Organization 76 (1): 70–104.CrossRefGoogle Scholar
Baccini, Leonardo, Pinto, Pablo M., and Weymouth, Stephen. 2017. “The Distributional Consequences of Preferential Trade Liberalization: Firm-Level Evidence.” International Organization 71 (2): 373–95.CrossRefGoogle Scholar
Baldwin, Richard E., and Okubo, Toshihiro. 2014. “International Trade, Offshoring and Heterogeneous Firms.” Review of International Economics 22 (1): 59–72.CrossRefGoogle Scholar
Betz, Timm. 2017. “Trading Interests: Domestic Institutions, International Negotiations, and the Politics of Trade.” The Journal of Politics 79 (4): 1237–52.CrossRefGoogle Scholar
Betz, Timm, Pond, Amy, and Yin, Weiwen. 2021. “Investment Agreements and the Fragmentation of Firms across Countries.” The Review of International Organizations 16 (4): 755–91.CrossRefGoogle Scholar
Bombardini, Matilde, and Trebbi, Francesco. 2012. “Competition and Political Organization: Together or Alone in Lobbying for Trade Policy?” Journal of International Economics 87 (1): 18–26.CrossRefGoogle Scholar
Bulman, David J. 2021. “The Economic Security Dilemma in US-China Relations.” Asian Perspective 45 (1): 49–73.CrossRefGoogle Scholar
Congressional Budget Office. 2020. “The Budget and Economic Outlook: 2020 to 2030.” Congressional Budget Office. US Government Printing Office.Google Scholar
Davis, Christina L. 2004. “International Institutions and Issue Linkage: Building Support for Agricultural Trade Liberalization.” American Political Science Review 98 (1): 153–69.CrossRefGoogle Scholar
Di Ubaldo, Mattia, and Gasiorek, Michael. 2022. “Non-trade Provisions in Trade Agreements and FDI.” E uropean Journal of Political Economy, 102208.CrossRefGoogle Scholar
Drope, Jeffrey M., and Hansen, Wendy L.. 2006. “Does Firm Size Matter? Analyzing Business Lobbying in the United States.” Business and Politics 8 (2): 1–17.CrossRefGoogle Scholar
Dür, Andreas. 2011. Protection for Exporters: Power and Discrimination in Transatlantic Trade Relations, 1930–2010. Cornell University Press.Google Scholar
Ebenstein, Avraham, Harrison, Ann, and McMillan, Margaret. 2015. “Why Are American Workers Getting Poorer? China, Trade and Offshoring.” Technical Report National Bureau of Economic Research.CrossRefGoogle Scholar
Eckhardt, Jappe, and Lee, Kelley. 2018. “Global Value Chains, Firm Preferences and the Design of Preferential Trade Agreements.” Global Policy 9: 58–66.CrossRefGoogle Scholar
Frieden, Jeffry A. 1991. “Invested Interests: The Politics of National Economic Policies in a World of Global Finance.” International Organization 45 (4): 425–51.CrossRefGoogle Scholar
Gilligan, Michael J. 1997. Empowering Exporters: Reciprocity, Delegation, and Collective Action in American Trade Policy. Number 8. University of Michigan Press.CrossRefGoogle Scholar
Government Accountability Office. 2022. “U.S.-China Trade: USTR Should Fully Document Internal Procedures for Making Tariff Exclusion and Extension Decisions.” US Government Accountability Office.Google Scholar
Grossman, Gene, and Helpman, Elhanan. 1994. “Protection for Sale.” American Economic Review 84 (4): 833–50.Google Scholar
Grossman, Gene M., and Rossi-Hansberg, Esteban. 2008. “Trading Tasks: A Simple Theory of Offshoring.” American Economic Review 98 (5): 1978–97.CrossRefGoogle Scholar
Grubel, Herbert G., and Lloyd, Peter J.. 1971. “The Empirical Measurement of Intra-industry Trade.” Economic Record 47 (4): 494–517.CrossRefGoogle Scholar
Gulotty, Robert, and Li, Xiaojun. 2020. “Anticipating Exclusion: Global Supply Chains and Chinese Business Responses to the Trans-Pacific Partnership.” Business and Politics 22 (2): 253–78.CrossRefGoogle Scholar
Helpman, Elhanan. 1985. “Multinational Corporations and Trade Structure.” The Review of Economic Studies 52 (3): 443–57.CrossRefGoogle Scholar
Helpman, Elhanan, Melitz, Marc J., and Yeaple, Stephen R.. 2004. “Export versus FDI with Heterogeneous Firms.” American Economic Review 94 (1): 300–16.CrossRefGoogle Scholar
Hiscox, Michael J. 2001. “Class versus Industry Cleavages: Inter-industry Factor Mobility and the Politics of Trade.” International Organization 55 (1): 1–46.CrossRefGoogle Scholar
Hua, Shiping. 2022. The Political Logic of the US-China Trade War. Lexington Books.Google Scholar
Jensen, J. Bradford, Quinn, Dennis P., and Weymouth, Stephen. 2015. “The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes.” International Organization 69 (4): 913–47.CrossRefGoogle Scholar
Johns, Leslie, Pelc, Krzysztof J., and Wellhausen, Rachel L.. 2019. “How a Retreat from Global Economic Governance May Empower Business Interests.” The Journal of Politics 81 (2): 731–38.CrossRefGoogle Scholar
Kerner, Andrew, Sumner, Jane, and Richter, Brian. 2020. “Offshore Production's Effect on Americans’ Attitudes toward Trade.” Business and Politics 22 (3): 539–71.CrossRefGoogle Scholar
Kim, In Song. 2017. “Political Cleavages within Industry: Firm-Level Lobbying for Trade Liberalization.” American Political Science Review 111 (1): 1–20.CrossRefGoogle Scholar
Kim, In Song, and Milner, Helen V.. 2019. “Multinational Corporations and Their Influence through Lobbying on Foreign Policy.” In Multinational Corporations in a Changing Global Economy. 497–536. Washington, DC: Brookings Institution.Google Scholar
Kim, In Song, Milner, Helen V., Bernauer, Thomas, Osgood, Iain, Spilker, Gabriele, and Tingley, Dustin. 2019. “Firms and Global Value Chains: Identifying Firms Multidimensional Trade Preferences.” International Studies Quarterly 63 (1): 153–67.CrossRefGoogle Scholar
Kim, Soo Yeon. 2015. Deep Integration and Regional Trade Agreements. Oxford: Oxford University Press.Google Scholar
Kim, Soo Yeon. 2021. “Investment Commitments in PTAs and MNCS in Partner Countries.” Economics & Politics 33 (3): 415–42.CrossRefGoogle Scholar
Kim, Soo Yeon, and Spilker, Gabriele. 2019. “Global Value Chains and the Political Economy of WTO Disputes.” The Review of International Organizations 14 (2): 239–60.CrossRefGoogle Scholar
Kim, Sung Eun, and Margalit, Yotam. 2021. “Tariffs as Electoral Weapons: The Political Geography of the US-China Trade War.” International Organization 75 (1): 1–38.CrossRefGoogle Scholar
Kuk, John Seungmin, Seligsohn, Deborah, and Zhang, Jiakun Jack. 2018. “From Tiananmen to Outsourcing: The Effect of Rising Import Competition on Congressional Voting towards China.” Journal of Contemporary China 27 (109): 103–19.CrossRefGoogle Scholar
Lechner, Lisa. 2016. “The Domestic Battle over the Design of Non-trade Issues in Preferential Trade Agreements.” Review of International Political Economy 23 (5): 840–71.CrossRefGoogle Scholar
Lee, Jieun, and Osgood, Iain. 2019. “Exports, Jobs, Growth! Congressional Hearings on US Trade Agreements.” Economics & Politics 31 (1): 1–26.CrossRefGoogle Scholar
Lee, Jieun, and Osgood, Iain. 2021. “Firms Fight Back: Production Networks and Corporate Opposition to the China Trade War.” In Geopolitics, Supply Chains, and International Relations in East Asia, edited by Solingen, Etel, 153–72. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Liu, Tao, and Woo, Wing Thye. 2018. “Understanding the US-China Trade War.” China Economic Journal 11 (3): 319–40.CrossRefGoogle Scholar
Madeira, Mary Anne. 2016. “New Trade, New Politics: Intra-industry Trade and Domestic Political Coalitions.” Review of International Political Economy 23 (4): 677–711.CrossRefGoogle Scholar
Manger, Mark S. 2009. Investing in Protection: The Politics of Preferential Trade Agreements between North and South. Cambridge University Press.CrossRefGoogle Scholar
Manger, Mark S. 2012. “Vertical Trade Specialization and the Formation of North-South PTAs.” World Politics 64 (4): 622–58.CrossRefGoogle Scholar
Markusen, James R. 1995. “The Boundaries of Multinational Enterprises and the Theory of International Trade.” Journal of Economic Perspectives 9 (2): 169–89.CrossRefGoogle Scholar
Milner, Helen V. 1988a. Resisting Protectionism: Global Industries and the Politics of International Trade. Princeton University Press.CrossRefGoogle Scholar
Milner, Helen V. 1988b. “Trading Places: Industries for Free Trade.” World Politics 40 (3): 350–76.CrossRefGoogle Scholar
Oh, Seung-Youn. 2021. “China's Race to the Top: Regional and Global Implications of China's Industrial Policy.” World Trade Review 20 (2): 169–85.CrossRefGoogle Scholar
Osgood, Iain. 2016. “Differentiated Products, Divided Industries: Firm Preferences over Trade Liberalization.” Economics & Politics 28 (2): 161–80.CrossRefGoogle Scholar
Osgood, Iain. 2017a. “The Breakdown of Industrial Opposition to Trade: Firms, Product Variety, and Reciprocal Liberalization.” World Politics 69 (1): 184–231.CrossRefGoogle Scholar
Osgood, Iain. 2017b. “Industrial Fragmentation over Trade: The Role of Variation in Global Engagement.” International Studies Quarterly 61 (3): 642–59.CrossRefGoogle Scholar
Osgood, Iain. 2018. “Globalizing the Supply Chain: Firm and Industrial Support for US Trade Agreements.” International Organization 72 (2): 455–84.CrossRefGoogle Scholar
Osgood, Iain. 2021. “Vanguards of Globalization: Organization and Political Action among America's Pro-trade Firms.” Business and Politics, 23(1), 1–35.CrossRefGoogle Scholar
Osgood, Iain, Tingley, Dustin, Bernauer, Thomas, Kim, In Song, Milner, Helen V., and Spilker, Gabriele. 2017. “The Charmed Life of Superstar Exporters: Survey Evidence on Firms and Trade Policy.” The Journal of Politics 79 (1): 133–52.CrossRefGoogle Scholar
Owen, Erica, and Johnston, Noel P.. 2017. “Occupation and the Political Economy of Trade: Job Routineness, Offshorability, and Protectionist Sentiment.” International Organization 71 (4): 665–99.CrossRefGoogle Scholar
Pareto, Vilfredo. 1971. Manual of Political Economy. A. M. Kelley.Google Scholar
Park, Jong Hee, and Kim, Byung Koo. 2020. “Why Your Neighbor Matters: Positions in Preferential Trade Agreement Networks and Export Growth in Global Value Chains.” Economics & Politics 32 (3): 381–410.CrossRefGoogle Scholar
Plouffe, Michael. 2017. “Firm Heterogeneity and Trade-Policy Stances Evidence from a Survey of Japanese Producers.” Business and Politics 19 (1): 1–40.CrossRefGoogle Scholar
Postnikov, Evgeny, and Bastiaens, Ida. 2020. “Social Protectionist Bias: The Domestic Politics of North–South Trade Agreements.” The British Journal of Politics and International Relations 22 (2): 347–66.CrossRefGoogle Scholar
Roosevelt, Megan. 2021. “The Politics of Productivity: Differences in Exporting Firms across Domestic Contexts.” Business and Politics 23 (2): 221–42.CrossRefGoogle Scholar
Tiberghien, Yves, 2020. “Asia's Rise and the Transition to a Post-Western Global Order.” In The Decline of Western-Centric World and the Emerging Global Order: Contending Views, edited by Chu, Yun-han, Zheng, Yongnian, 357–78. London: Routledge.CrossRefGoogle Scholar
Yildirim, Aydin B. 2018. “Firms Integration into Value Chains and Compliance with Adverse WTO Panel Rulings.” World Trade Review 17 (1): 1–31.CrossRefGoogle Scholar
Yildirim, Aydin B., Tyson Chatagnier, J., Poletti, Arlo, and De Bièvre, Dirk. 2018. “The Internationalization of Production and the Politics of Compliance in WTO Disputes.” The Review of International Organizations 13 (1): 49–75.CrossRefGoogle Scholar
Zeng, Ka. 2021. “Exit vs. Voice: Global Sourcing, Multinational Production, and the China Trade Lobby.” Business and Politics 23 (2): 282–308.CrossRefGoogle Scholar
Zeng, Ka, Sebold, Karen, and Lu, Yue. 2020. “Global Value Chains and Corporate Lobbying for Trade Liberalization.” The Review of International Organizations 15 (2): 409–43.CrossRefGoogle Scholar
Zeng, Ka, and Li, Xiaojun. 2021. Fragmenting Globalization: The Politics of Preferential Trade Liberalization in China and the United States. University of Michigan Press.CrossRefGoogle Scholar
Zeng, Ka, Lu, Yue, and Li, Ya-wei. 2021. “Trade Agreements and Global Value Chain (GVC) Participation: Evidence from Chinese Industries.” Economics & Politics 33 (3): 533–82.CrossRefGoogle Scholar
Zhu, Boliang, Waddick, Aubrey, and Villegas-Cruz, Angel. 2021. “Firms Caught in Crossfire: International Stakes and Domestic Politics in Corporate Positioning on De-globalization.” Paper Presentation. IPES 2021, Boulder, CO.Google Scholar
Supplementary material: PDF

Lee and Osgood supplementary material

Lee and Osgood supplementary material

Download Lee and Osgood supplementary material(PDF)
PDF 136.4 KB