MNCs, NTBs and "New Protectionism": Trade Barriers in an Era of Global Capital

Abstract

The post-World War II global economy is characterized by two broad phenomena: liberalization of tariff barriers that restricted trade across a broad swath of industries and countries, and the expansion of global direct investment and the rise of supply chains in goods trade. However, the secular decline of tariffs has not meant universal liberalization. In some industries, tariffs and tariff-like policies still restrict trade. In others, measures that are unlike tariffs have either become more prominent as tariffs fell or have risen to provide alternate protection.

Work in political science and economics has advanced a wide variety of explanations for the transition from tariffs to non-tariff measures generally, or for the presence or absence of specific non-tariff trade instruments in particular. A more limited body of work has examined the substitution across policy instruments, but has not attempted to generalize beyond the policies under consideration. We assert that part of the limitation in this work arises from the traditional dichotomy of tariffs versus non-tariff measures.

To resolve this shortcoming and advance the discussion of trade politics and trade agreements, this dissertation advances a new framework for considering trade-distorting policies that apply both at- and behind-the-border. Policies are categorized according to how they apply costs - according to the location of a good's production, the content in or process of production, or the firm that produces it. Policies that raise costs indiscriminately are also considered.

We explain the logic of this typology and the distributive consequences of each policy. Then, we explain the distributive consequences of imposing these policies in a single-country and two-country interaction. From these distributive outcomes, we introduce a theory of protection-seeking where firms in a given industry lobby for levels and varieties of protection that serve their interests in light of the preferences of other politically-salient firms. Industry characteristics like foreign investment, product differentiation, industry concentration, and firm efficiency all work to shape the types of trade-distorting instruments which industries may obtain from responsive governments. With this lobbying logic established, we test that theory against data from the United States in 2012. Comparing industry characteristics against the presence or absence of the four types of policies across more than 3000 types of products, we find support for some implications of the lobbying theory, but also find areas for further inquiry.

This dissertation contributes to the wider discussion of evolving protectionism in political economy through clarification, by advancing a new logic of protection- or liberalization-seeking coalitions that considers multinational firms, and through an investigation of the "contours" of protection in the United States, a critical power in the global goods and investment market. In doing so, it moves the discipline closer to understanding the deep links between global investment flows and the politics of global trade and trade policy.