Trade policy has become increasingly multidimensional. Current trade agreements not only address market access but also encompass rules and provisions related to flexibility of commitment, investment protection, and dispute settlement mechanisms. Yet, rigorous evidence about how interest groups evaluate each policy measure in relation to others remains scarce. We develop a firm-level theoretical framework to explain how firms’ international operations affect their preferences on different trade policy measures. We experimentally evaluate preferences over multiple policy dimensions using a conjoint analysis on firms in Costa Rica. Notably, for many types of firms, the standard trade policy measures of yesteryear — tariffs and subsidies — are no longer their most important concerns. Instead, the degree of firms’ involvement in global value chains shapes their preferences. Multinational corporations care most about protection of their foreign investments. Strong dispute settlement procedures are most valued by exporters who are not central to global supply networks. Finally, preferences over these policy dimensions are more likely to vary by firm, not by industry, challenging the conventional focus on inter-industry distinctions in the literature.
Preferential Trade Agreements (PTAs) have become the most prevalent form of international trade liberalization in recent decades, even though it remains far from clear what their effects on economies and their key units, firms, are. This paper evaluates the distributional consequences of trade liberalization within industries differentiating two distinct aspects in which trade liberalization could result in higher trade flows: the intensive vs. the extensive margin of trade. In particular, we analyze whether trade liberalization leads to increased trade flows because either firms trade more volume in products they have already traded before (intensive margin) or because they start to trade products they have not traded previously (extensive margin), or both. We test these arguments for the Dominican Republic–Central America–United States Free Trade Agreement (CAFTA-DR) and exporting firms based in Costa Rica for the time-period 2008–2014. The results of our study suggest that the effects of CAFTA-DR depend not only on whether we analyze the extensive versus the intensive margin of trade but also whether the product in question is homogenous or differentiated and whether the exporting firm under analysis is small or large. In particular, we find support for the theoretical expectation that firms exporting heterogeneous products, such as textiles, gain from trade agreements, such as CAFTA-DR, in that they can export more varieties of their products. Yet at the same time, they tend to lose at the intensive margin by a reduction in their trade volume while the opposite pattern occurs for firms exporting homogenous products.
Donald Trump’s election has called into question many fundamental assumptions about politics and society. Should the forty-fifth president of the United States make us reconsider the nature and future of the global order? Collecting a wide range of perspectives from leading political scientists, historians, and international-relations scholars, Chaos in the Liberal Order explores the global trends that led to Trump’s stunning victory and the impact his presidency will have on the international political landscape.
Contributors situate Trump among past foreign policy upheavals and enduring models for global governance, seeking to understand how and why he departs from precedents and norms. The book considers key issues, such as what Trump means for America’s role in the world; the relationship between domestic and international politics; and Trump’s place in the rise of the far right worldwide. It poses challenging questions, including: Does Trump’s election signal the downfall of the liberal order or unveil its resilience? What is the importance of individual leaders for the international system, and to what extent is Trump an outlier? Is there a Trump doctrine, or is America’s president fundamentally impulsive and scattershot? The book considers the effects of Trump’s presidency on trends in human rights, international alliances, and regional conflicts. With provocative contributions from prominent figures such as Stephen M. Walt, Andrew J. Bacevich, and Samuel Moyn, this timely collection brings much-needed expert perspectives on our tumultuous era.
There is evidence that some countries negotiate trade agreements during economic downturns. Why would a leader do this? We argue that political leaders can gain from such agreements because of the signals they send to their public. The public are less likely to blame leaders for adverse economic conditions when they have implemented sound economic policies, such as signing agreements designed to liberalize trade and prevent a slide into protectionism. In hard economic times, leaders – especially those in democratic environments – may find that trade agreements are a useful way to reassure the public. Since majorities in many countries around the world view trade favorably, leaders may see agreements that prevent them from adopting protectionism as a way to maintain support. We evaluate this argument by analyzing preferential trade agreements (PTAs) formed since 1962. We find that, on average, democratic countries are more likely to ratify PTAs during hard economic times. We also find that democratic leaders who sign PTAs during downturns enjoy a longer tenure than their counterparts who do not sign such agreements.
Even in cases where the national security implications of sales have been less clear, Chinese investors looking to buy U.S. companies have been facing increasing scrutiny. Over the past several years, we have been researching the role that politics plays in regulating investments between the United States and China. We find that even though the explicit justification for U.S. hostility to Chinese investments is national security, much of the real politics involves the question of whether China is willing to reciprocate U.S. market openness by opening up its own companies to U.S. investors.
Scholars studying foreign assistance differ over whether multilateral aid is preferable to bilateral aid for promoting development, but nearly all build their cases primarily on highly aggregated cross-national time-series data. We investigate this topic experimentally from the perspective of those whom the foreign aid directly affects: recipient citizens and elites. We thus report results of a survey experiment with behavioral outcomes on more than 3000 Ugandan citizens and over 300 members of Uganda’s Parliament. In spite of a large literature suggesting differences, the findings generally reveal few substantive differences in citizens’ and elites’ preferences and behavior toward the two types of aid. While no strong pattern of differences emerges, limited evidence suggests that the public evinces greater trust in multilateral institutions, and both masses and elites feel that multilateral aid is more transparent. Overall, these null results inform an ever-expanding literature, which is increasingly articulating distinctions between multilateral and bilateral aid. At least in the minds of the recipients, however, multilateral and bilateral aid may not in fact be all that different. This accords with the literature noting the strong overlap in aid organizations and bemoaning the fact that they do not specialize more. Our results raise the question about why have both multilateral and bilateral aid donors if they in effect do the same thing.
Prior international political economy public opinion research has primarily examined how economic and socio-cultural factors shape individuals’ views on the flows of goods, people and capital. This research has largely ignored whether individuals also care about rewarding or punishing foreign countries for their policies on these issues. We tested this possibility by administering a series of conjoint and traditional survey experiments in the United States and China that examined how reciprocity influences opposition to foreign acquisitions of domestic companies. We find that reciprocity is an important determinant of public opinion on the regulation of foreign investments. This suggests the need to consider the policies that other countries adopt when trying to explain public attitudes toward global economic integration.
What factors determine firms’ attitudes toward trade policy? This paper considers producers’ policy preferences and political behavior in light of two key patterns in modern international trade: industries that face import competition often have many exporters, and foreign sales are concentrated in the hands of a small number of “superstar” exporters. Using a new survey of Costa Rican firms matched to systematic firm-level data on export behavior, we find that firm features are generally more important predictors of attitudes toward trade liberalization than industry-wide comparative advantage. We also show that export intensity is strongly associated with interest and lobbying activity on trade policy. The largest exporters, who are the strongest supporters of global integration, dominate trade politics.
An ongoing debate among prominent scholars of international relations concerns the future direction of American foreign policy. In particular, scholars, pundits, and commentators wonder whether the United States will continue to pursue a liberal internationalist stance. At its core, liberal internationalism entails international engagement, not isolationism. And despite the ‘liberal’ terminology, it is not a policy skewed towards Democrats and political liberals and away from Republicans and political conservatives. Instead the liberal component of internationalism embodies many bi-partisan principles: support for freedom, democracy, human rights, a free press, as well as an open world economy for the movement of goods, services, people, and ideas. Not surprisingly, an amazing amount of ink has been spilled on what the election of Donald Trump as President means for the trajectory of U.S. foreign policy and a possible break from liberal internationalism.
A recent RIPE article by Jerry Cohen argues that current research on the political economy of money has stagnated because of its overemphasis on the scientific method and domestic variables. We argue that a wide array of scientifically oriented research on the IPE of money considers the system in many different ways. To help build a dialogue, we categorize each of these conceptions of ‘the system’ and give examples of their application from recent research on the IPE of money. Our hope is that this typology will help scholars of different approaches recognize the similarities and differences in their research, beyond simply whether the research is scientific or heterodox.
Does foreign aid enable or constrain elite capture of public revenues? Reflecting on prominent debates in the foreign aid literature, we examine whether recipient preferences are consistent with a view that foreign donors wield substantial control over the flow of aid dollars, making elite capture more difficult and mass benefits more likely. We compare elite and mass support for foreign aid versus government spending on development projects through a survey experiment with behavioral outcomes. A key innovation is a parallel experiment on members of the Ugandan national parliament and a representative sample of Ugandan citizens. For two actual aid projects, we randomly assigned different funders to the projects. Significant treatment effects reveal that members of parliament support government programs over foreign aid, whereas citizens prefer aid over government. Donor control also implies that citizens should favor foreign aid more and elites less as their perceptions of government clientelism and corruption in-crease. We explore this and report on other alternative mechanisms. Effects for citizens and elites are most apparent for those perceiving significant government corruption, suggesting that both sets of subjects perceive significant donor control over aid.
Different theories about the impact of aid make distinct predictions about citizens’ attitudes toward foreign aid in recipient countries. We investigate their preferences toward aid and government projects in order to examine these different theories. Are citizens indifferent between development projects funded by their own government versus those funded by foreign aid donors, as aid capture theory suggests? To address this, in an experiment on a large, representative sample of Ugandan citizens, we randomly assigned the names of funding groups for actual forthcoming development projects and invited citizens to express support attitudinally and behaviorally. We find that citizens are significantly more willing to show behavioral support in favor of foreign aid projects compared to government programs, especially if they already perceive the government as corrupt or clientelist or if they are not supporters of the ruling party. They also trust donors more, think they are more effective, and do not consistently oppose aid conditionality. This experimental evidence is consistent with a theory that we call donor control which sees donors asbeing able to target and condition aid so that it is not fungible with government revenues and thus to be able to better direct it to meet citizens’ needs.
Joseph Weinberg’s piece highlights an important substantive and methodological question: how to analyze, theoretically and methodologically, differences in national policy autonomy among countries and across policy areas in the era of globalization or regional integration. EU membership constrains the policy autonomy of member states, which can change the relationship between the explanatory variables of interest and the outcome variable. As Weinberg argues, “While a particular set of independent variables may explain outcomes in sovereign countries, those same variables would have little explanatory power where decisions are made by a supranational body” (5). We agree wholeheartedly that, if membership in a supranational institution constrains certain policy outcomes, then researchers should account for that in their theoretical and empirical models. We disagree, however, on the solution. In particular, we show how multi-level models have important advantages in modelling this phenomenon, compared to the split-sample regressions in his piece.
The proliferation of preferential trade agreements (PTAs) is the most prominent and prevalent driver of regional trade governance in the contemporary international economy. PTAs grant member states preferential access to each other’s markets, and they also shape the contours of economic regionalism across different geographic neighborhoods. The chapter analyzes the central issues animating scholarship on regional trade governance, with a focus on the role of PTAs and the future research trajectories relevant to the evolution of regional institution-building. It examines the domestic and international political factors that influence the establishment, design, and the political as well as economic effects of PTAs. It also addresses how the budding “mega-PTAs” currently under negotiation may affect the stability and governance of the multilateral trading system. The analysis highlights an important research frontier in the study of PTAs: the emergence of deep integration agreements that seek extensive “behind-the-border” trade liberalization and regulatory coordination.
Does global market integration help or hinder government efforts to improve the livelihoods of the world’s poorest citizens? Standard trade theories suggest that government interventions become less imperative as developing countries liberalize. This is because labor in developing economies is abundant and cheap; export products that utilize this factor of production will employ large populations of low-skilled workers who will experience increases in the purchasing power of their wage income. Consumption increases, and the country as a whole is better off. For several decades now, developing economies have embraced this rationale for free trade and its welfare-enhancing effects on the majority.
A great deal of political economy scholarship has focused on how countries can attract foreign direct investment (FDI), and the effects of FDI on growth and political stability. A related topic that has received almost no attention, however, is that of divergent political reactions to inflows of FDI in the countries receiving investments. This is an oversight, because inward FDI flows are not equally welcomed by the host country and, in fact, often encounter strong political opposition. We study this phenomenon by examining political opposition to attempts by Chinese companies at mergers and acquisitions (M&As) with US firms. This is especially important given rapidly expanding Chinese M&A activity. We hypothesise that although most legal barriers to foreign M&As are based on national security considerations, objections on these grounds are often vehicles through which to channel other grievances, and that economic distress and reciprocity are also key drivers of political opposition. To test this theory, we constructed an original dataset of 569 transactions that occurred between 1999 and 2014 involving Chinese acquirers and American targets. We find that there is more likely to be opposition to Chinese M&A attempts in security sensitive industries, economically distressed industries, and sectors in which US companies faced restrictions in China’s M&A markets.
Preferential trade agreements (PTAs) have been proliferating for more than two decades, with the negotiations for a Transatlantic Trade and Investment Partnership and a Trans-Pacific Partnership being just the tip of the iceberg. This volume addresses some of the most pressing issues related to the surge of these agreements. It includes chapters written by leading political scientists, economists and lawyers which theoretically and empirically advance our understanding of trade agreements. The key theme is that PTAs vary widely in terms of design. The authors provide explanations as to why we see these differences in design and whether and how these differences matter in practice. The tools for understanding the purposes and effects of PTAs that are offered will guide future research and inform practitioners and trade policy experts about progress in the scientific enquiry into PTAs.
When engaging with other countries, the U.S. government has a number of different policy instruments at its disposal, including foreign aid, international trade, and the use of military force. But what determines which policies are chosen? Does the United States rely too much on the use of military power and coercion in its foreign policies? Sailing the Water's Edge focuses on how domestic U.S. politics—in particular the interactions between the president, Congress, interest groups, bureaucratic institutions, and the public—have influenced foreign policy choices since World War II and shows why presidents have more control over some policy instruments than others. Presidential power matters and it varies systematically across policy instruments.
Helen Milner and Dustin Tingley consider how Congress and interest groups have substantial material interests in and ideological divisions around certain issues and that these factors constrain presidents from applying specific tools. As a result, presidents select instruments that they have more control over, such as use of the military. This militarization of U.S. foreign policy raises concerns about the nature of American engagement, substitution among policy tools, and the future of U.S. foreign policy. Milner and Tingley explore whether American foreign policy will remain guided by a grand strategy of liberal internationalism, what affects American foreign policy successes and failures, and the role of U.S. intelligence collection in shaping foreign policy. The authors support their arguments with rigorous theorizing, quantitative analysis, and focused case studies, such as U.S. foreign policy in Sub-Saharan Africa across two presidential administrations.
Sailing the Water’s Edge examines the importance of domestic political coalitions and institutions on the formation of American foreign policy.
International trade agreements lead to more foreign direct investment (FDI) in developing countries. This article examines the causal mechanisms underpinning this trade-investment linkage by asking whether institutional features of preferential trade agreements (PTAs), which allow governments to make more credible commitments to protect foreign investments, indeed result in greater FDI. The authors explore three institutional differences. First, they examine whether PTAs that have entered into force lead to greater FDI than PTAs that have merely been negotiated and signed, since only the former constitute a binding commitment under international law. Second, they ask whether trade agreements that have investment clauses lead to greater FDI. Third, they consider whether PTAs with dispute-settlement mechanisms lead to greater FDI. Analyses of FDI flows into 122 developing countries from 1971 to 2007 show that trade agreements that include stronger mechanisms for credible commitment induce more FDI. Institutional diversity in international agreements matters.
Following older debates in international relations literature concerning the relative importance of domestic versus systemic factors, newer debates emphasize interdependence among states and the complex interactions between systemic and domestic factors. As globalization and democratization advance, theories and empirical models of international politics have become more complicated. We present a systematic theoretical categorization of relationships between domestic and systemic variables. We use this categorization so that scholars can match their theory to the appropriate empirical model and assess the degree to which systemic factors affect their arguments. We also present two advances at the frontier of these empirical models. In one, we combine hierarchical models of moderating relationships with spatial models of interdependence among units within a system. In the other, we provide a model for analyzing spatial interdependence that varies over time. This enables us to examine how the level of interdependence among units has evolved. We illustrate our categorization and new models by revisiting the recent international political economy (IPE) debate over the relationship between trade policy and regime type in developing countries.