Trade policy in a “GVC World”: Multinational corporations and trade liberalization

Abstract

The globalization of production is changing the political economy of trade policymaking: Traditional supporters of free trade (exporters seeking market access in foreign countries) are joined by new actors (companies needing intermediates from abroad for their production processes) in their lobbying efforts for trade liberalization. Multinational corporations (MNCs) play a crucial role in this new alliance due to their strong involvement in international trade and endowment with resources that can be used to lobby policymakers. We derive an argument from these premises that leads to the expectation of variation in trade policy outcomes across industries depending on their degree of integration in a global network of multinational corporations. Disaggregated data on the level of tariffs and speed of tariff cuts in preferential trade agreements, international mergers and acquisitions at the firm level, and MNC imports of intermediates by sector allow us to test the argument. The findings support our theoretical expectations. The paper sheds light on the processes and outcomes of trade policymaking in a globalized economy by further developing an existing argument about GVCs and trade policy outcomes as well as expanding on it by adding data on international corporate connections.

Intra-industry trade and implications of the European Union-Japan Economic Partnership Agreement from the perspective of the automotive industry

“…A point of reference in the quantitative analysis of intra-industry trade is the Grubel-Lloyd (GL) index, employed in recent studies conducted by, among others, , Baccini, Dür, and Elsig (2018), Bobowski (2018), Bagchi and Bhattacharyya (2019), Anderer, Dür, and Lechner (2020), Zarbà, Chinnici, and D'Amico (2020) and Jošić and Žmuk (2020). Abd-el-Rahman (1984) is considered a pioneer of research on intra-industry trade, assuming decomposition into a horizontal and vertical pattern with the use of export and import unit values, further popularised due to research conducted by Greenaway, Hine, and Milner (1994).…”

The Political Economy of the EU Approach to the Rohingya Crisis in Myanmar

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“…For instance, the trade policy literature has widely noted that import-dependent firms tend to have stronger free-trade preferences than domestic firms operating in the same sector because they are interested in accessing cheap inputs from their affiliates abroad or independent foreign suppliers and are therefore not similarly wary of competition from foreign producers (Anderer et al, 2020;Eckhardt & Poletti, 2016;Jensen et al, 2015;Yildirim, 2018;Yildirim et al, 2018). This means that import-dependent firms can be expected to strongly support trade arrangements that do not disrupt their ties within GVCs, as well as to oppose trade policies that could bring about higher import costs (Bernard et al, 2012).…”

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