Skip to main content Accessibility help
×
Home
Hostname: page-component-cf9d5c678-5tm97 Total loading time: 0.425 Render date: 2021-07-26T17:27:51.596Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "metricsAbstractViews": false, "figures": true, "newCiteModal": false, "newCitedByModal": true, "newEcommerce": true, "newUsageEvents": true }

The Distributional Consequences of Preferential Trade Liberalization: Firm-Level Evidence

Published online by Cambridge University Press:  24 April 2017

Get access

Abstract

While increasing trade and foreign direct investment, international trade agreements create winners and losers. Our paper examines the distributional consequences of preferential trade agreements (PTAs) at the firm level. We contend that PTAs expand trade among the largest and most productive multinationals by lowering preferential tariffs. We examine data covering the near universe of US foreign direct investment and disaggregated tariff data from PTAs signed by the United States. Our results indicate that US preferential tariffs increase sales to the United States from the most competitive subsidiaries of multinational corporations operating in partner countries. We also find increases in market concentration in partner countries following preferential liberalization with the United States. By demonstrating that the gains from preferential liberalization are unevenly distributed across firms, we shed new light on the firm-level, economic sources of political mobilization over international trade and investment policies.

Type
Research Notes
Copyright
Copyright © The IO Foundation 2017 

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

Allee, Todd L., and Elsig, Manfred. 2016. Why Do Some International Institutions Contain Strong Dispute Settlement Provisions? Evidence from Preferential Trade Agreements. Review of International Organizations 11 (1):89120.CrossRefGoogle Scholar
Alt, James E., Carlsen, Fredrik, Heum, Per, and Johansen, Käre. 1999. Asset Specificity and the Political Behavior of Firms: Lobbying for Subsidies in Norway. International Organization 53 (1):99116.CrossRefGoogle Scholar
Baccini, Leonardo, and Urpelainen, Johannes. 2014. Cutting the Gordian Knot of Economic Reform: How International Institutions Promote Liberalization. New York: Oxford University Press.CrossRefGoogle Scholar
Bagwell, Kyle, and Staiger, Robert W.. 1999. An Economic Theory of GATT. American Economic Review 89 (1):215–48.CrossRefGoogle Scholar
Baier, Scott L., and Bergstrand, Jeffrey H.. 2007. Do Free Trade Agreements Actually Increase Members’ International Trade? Journal of International Economics 71 (1):7295.CrossRefGoogle Scholar
Bailey, Michael A., Goldstein, Judith, and Weingast, Barry. 1997. The Institutional Roots of American Trade Policy. World Politics 49 (3):309–38.CrossRefGoogle Scholar
Baker, Andy. 2005. Who Wants to Globalize? Consumer Tastes and Labor Markets in a Theory of Trade Policy Beliefs. American Journal of Political Science 49 (4):924–38.CrossRefGoogle Scholar
Barthel, Fabien, and Neumayer, Eric. 2012. Competing for Scarce Foreign Capital: Spatial Dependence in the Diffusion of Double Taxation Treaties. International Studies Quarterly 56 (4):654–60.CrossRefGoogle Scholar
Bernard, Andrew B., and Jensen, J. Bradford. 1999. Exceptional Exporter Performance: Cause, Effect, or Both? Journal of International Economics 47 (1):125.CrossRefGoogle Scholar
Bernard, Andrew B., Jensen, J. Bradford, and Schott, Peter K.. 2006. Trade Costs, Firms and Productivity. Journal of Monetary Economics 53:917–37.CrossRefGoogle Scholar
Bernard, Andrew B., Jensen, J. Bradford, and Schott, Peter K.. 2009. Importers, Exporters and Multinationals: A Portrait of Firms in the US That Trade Goods. In Producer Dynamics: New Evidence from Micro Data, edited by Dunne, Timothy, Jensen, J. Bradford, and Roberts, Mark J., 513–52. Chicago: University of Chicago Press.CrossRefGoogle Scholar
Bilir, L. Kamran. 2014. Patent Laws, Product Lifecycle Lengths, and Mulinational Activity. American Economic Review 104 (7):19792013.CrossRefGoogle Scholar
Blanchard, Emily J. 2007. Foreign Direct Investment, Endogenous Tariffs, and Preferential Trade Agreements. The B.E. Journal of Economic Analysis and Policy 7 (1):152.CrossRefGoogle Scholar
Blanchard, Emily J., and Matschke, Xenia. 2015. US Multinationals and Preferential Market Access. Review of Economics and Statistics 97 (4):839–54.CrossRefGoogle Scholar
Bombardini, Matilde. 2008. Firm Heterogeneity and Lobby Participation. Journal of International Economics 75 (2):329–48.CrossRefGoogle Scholar
Büthe, Tim, and Milner, Helen V.. 2008. The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements? American Journal of Political Science 52 (4):741–62.CrossRefGoogle Scholar
Büthe, Tim, and Milner, Helen V.. 2014. Foreign Direct Investment and Institutional Diversity in Trade Agreements: Credibility, Commitment, and Economic Flows in the Developing World, 1971–2007. World Politics 66 (1):88122.CrossRefGoogle Scholar
Carr, David L., Markusen, James R., and Maskus, Keith E.. 2001. Estimating the Knowledge-Capital Model of the Multinational Enterprise. American Economic Review 91 (3):693708.CrossRefGoogle Scholar
Chase, Kerry. 2003. Economic Interests and Regional Trading Arrangements: The Case of NAFTA. International Organization 57 (1):137–74.CrossRefGoogle Scholar
Cheng, Wenya. 2012. Tariffs and Employment: Evidence From Chinese Manufacturing Industry. Working Paper, London School of Economics.Google Scholar
Dür, Andreas, Baccini, Leonardo, and Elsig, Manfred. 2014. The Design of International Trade Agreements: Introducing a New Dataset. Review of International Organizations 9 (3):353–75.CrossRefGoogle Scholar
Finger, J. Michael, and Kreinin, Mordechai E.. 1979. A Measure of Export Similarity and Its Possible Uses. The Economic Journal 89 (4):905–12.CrossRefGoogle Scholar
Frieden, Jeffry A. 1991. Debt, Development, and Democracy: Modern Political Economy and Latin America, 1965–1985. Princeton, NJ: Princeton University Press.Google Scholar
Goldstein, Judith L., Rivers, Douglas, and Tomz, Michael. 2007. Institutions in International Relations: Understanding the Effects of the GATT and the WTO on World Trade. International Organization 61 (1):3767.CrossRefGoogle Scholar
Gowa, Joanne, and Kim, Soo Yeon. 2005. An Exclusive Country Club. The Effects of the GATT on Trade, 1950–1994. World Politics 57 (4):453–78.CrossRefGoogle Scholar
Gray, Julia. 2013. The Company States Keep: International Economic Organizations and Investor Perceptions. New York: Cambridge University Press.CrossRefGoogle Scholar
Grossman, Gene M., and Helpman, Elhanan. 1994. Protection for Sale. American Economic Review 84 (4):833–50.Google Scholar
Hathaway, Oona A. 1998. Positive Feedback: The Impact of Trade Liberalization on Industry Demands for Protection. International Organization 52 (3):576612.CrossRefGoogle Scholar
Helpman, Elhanan. 2006. Trade, FDI, and the Organization of Firms. Journal of Economic Literature 44 (3):589630.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. 2002. Commerce, Coalitions, and Factor Mobility: Evidence from Congressional Votes on Trade Legislation. American Political Science Review 96 (3):593608.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, and Wellhausen, Rachel. 2016. Under One Roof: Supply Chains and the Protection of Foreign Investments. American Political Science Review 110:3151.CrossRefGoogle Scholar
Kim, In Song. 2016. Political Cleavages within Industry: Firm-level Lobbying for Trade Liberalization. Working paper. Available at < http://web.mit.edu/insong/www/pdf/exporters.pdf >..>Google Scholar
Kim, Soo Yeon. 2015. Regionalisation in Search of Regionalism: Production Networks and Deep Integration Commitments in Asia's PTAs. In Trade Cooperation: The Purpose, Design and Effects of Preferential Trade Agreements, edited by Dür, Andreas and Elsig, Manfred, 134–65. Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Magee, Christopher S. 2008. New Measures of Trade Creation and Trade Diversion. Journal of International Economics 75 (2):349–62.CrossRefGoogle Scholar
Manger, Mark S. 2009. Investing in Protection: The Politics of Preferential Trading Agreements Between North and South. New York: Cambridge University Press.CrossRefGoogle Scholar
Mansfield, Edward D., and Milner, Helen V.. 2012. Votes, Vetoes, and the Political Economy of International Trade Agreements. Princeton, NJ: Princeton University Press.Google Scholar
Mansfield, Edward D., and Reinhardt, Eric. 2008. International Institutions and the Volatility of International Trade. International Organization 62 (4):621–52.CrossRefGoogle Scholar
Mayer, Thierry, and Ottaviano, Gianmarco. 2008. The Happy Few: The Internationalisation of European Firms. Intereconomics 43 (3):135–48.CrossRefGoogle Scholar
McGillivray, Fiona. 2004. Privileging Industry: The Comparative Politics of Trade and Industrial Policy. Princeton, NJ: Princeton University Press.Google Scholar
Melitz, Marc. 2003. The Impact of Trade on Intra-industry Reallocations and Aggregate Industry Productivity. Econometrica 71 (6):16951725.CrossRefGoogle Scholar
Melitz, Marc, and Ottaviano, Giancarlo I.P.. 2008. Market Size, Trade, and Productivity. Review of Economic Studies 75 (1):295316.CrossRefGoogle Scholar
Milner, Helen V. 1988. Resisting Protectionism: Global Industries and the Politics of International Trade. Princeton, NJ: Princeton University Press.Google Scholar
Osgood, Iain, Bernauer, Thomas, Kim, In Song, Milner, Helen, Tingley, Dustin, and Spilker, Gabrielle. 2016. The Charmed Life of Superstar Exporters: Firms and Trade Policy in Costa Rica. The Journal of Politics 79 (1) Published online 21 October. Available at < http://dx.doi.org/10.1086/687207 >.CrossRefGoogle Scholar
Pierce, Justin R., and Schott, Peter K.. 2012. Concording US Harmonized System Codes Over Time. Journal of Official Statistics 28 (1):5368.Google Scholar
Rogowski, Ronald. 1987. Political Cleavages and Changing Exposure to Trade. American Political Science Review 81 (4):1121–37.CrossRefGoogle Scholar
Schonhardt-Bailey, Cheryl. 1991. Specific Factors, Capital Markets, Portfolio Diversification, and Free Trade: Domestic Determinants of the Repeal of the Corn Laws. World Politics 43 (4):545–69.CrossRefGoogle Scholar
Trefler, Daniel. 2004. The Long and Short of the Canada–US Free Trade Agreement. American Economic Review 94 (4):870–95.CrossRefGoogle Scholar
Wooldridge, Jeffrey. 2012. Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT University Press.Google Scholar
World Bank. 2014. World Integrated Trade Solution. Available at < http://wits.worldbank.org >..>Google Scholar
Supplementary material: PDF

Baccini supplementary material

Appendices

Download Baccini supplementary material(PDF)
PDF 1 MB
54
Cited by

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

The Distributional Consequences of Preferential Trade Liberalization: Firm-Level Evidence
Available formats
×

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

The Distributional Consequences of Preferential Trade Liberalization: Firm-Level Evidence
Available formats
×

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

The Distributional Consequences of Preferential Trade Liberalization: Firm-Level Evidence
Available formats
×
×

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *