Trade agreements and Global Value Chain (GVC) participation: Evidence from Chinese industries

Abstract

The growing fragmentation of production across national borders and the proliferation of preferential trade agreements (PTAs) have become salient features of the global economy in the past decades. This paper examines the role of PTAs in promoting the integration of domestic industries into global value chains (GVCs) based on the experience of China, a country that has emerged as a key link in East Asian and global production networks in recent years. We conjecture that both the presence of PTAs and the depth of these agreements matter for GVC participation. Furthermore, PTAs that contain strong provisions with regard to investment protection and services are particularly likely to stimulate the expansion of GVC linkages. This is because strong investment protection provisions may reduce the disruptions that hostile government policy may generate for the entire production chain. Rigorous PTA provisions regarding services may help facilitate the provision of services, which are not only critical in enabling the emergence of GVCs, but are also becoming essential inputs in GVC trade. Empirical analysis of the effect of the PTAs signed by China on the GVC participation of 16 Chinese industries between 2005 and 2015 lends substantial support to our hypotheses.

Protection forestall: Offshore firms against tariffs in their own industry

“…So, firms might come out to support a trade deal because they want to offshore their own final product, because they source inputs from overseas, or because they are exporters. Second, comprehensive forms of trade liberalization, like PTAs or the creation of the World Trade Organization (WTO), have many implications across a wide variety of policy instruments, some of 19 Manger (2012); Jensen, Quinn, and Weymouth (2015); Eckhardt and Lee (2018); ; Park and Kim (2020); Zeng, Lu, and Li (2021). 20 Osgood (2017b).…”

“… 2 Manger (2012); Jensen, Quinn, and Weymouth (2015); Osgood (2018); Kim et al (2019); Zeng, Lu, and Li (2021); Anderer, Dür, and Lechner (2020). …”

“… 19 Manger (2012); Jensen, Quinn, and Weymouth (2015); Eckhardt and Lee (2018); Kim and Spilker (2019); Park and Kim (2020); Zeng, Lu, and Li (2021). …”

How do digital trade rules affect global value chain trade in services?—Analysis of preferential trade agreements

“…Our research makes a significant contribution to the literature by conducting the first empirical analysis of the relationship between digital trade rules and GVC trade in services. While previous studies have examined the impact of trade agreements on global manufacturing activities (Zeng et al, 2021; Zhang et al, 2021) or gross service trade (Sun et al, 2022), our research focuses on the effect of digital trade rules in PTAs on bilateral GVC services exports.…”

Deep trade agreements, production position distance and bilateral global value chain participation

“…The participation of member countries in GVCs is increasingly supported by a growing body of empirical studies (e.g. Johnson & Noguera, 2017; Orefice & Rocha, 2014; Osnago et al, 2016; Rubínová, 2017; Zeng et al, 2021), which highlight the promotional effect of deep trade agreements in this regard. Moreover, a few recent empirical studies have also estimated the heterogeneous impact of deep trade agreements on GVC participation of member countries.…”