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U.S. Multinationals and Preferential Market Access

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  • Emily Blanchard
  • Xenia Matschke

Abstract

This paper examines the relationship between offshoring activity by U.S. multinational firms and the structure of U.S trade preferences. We combine firm level panel data on U.S. foreign affiliate activity from the U.S. Bureau of Economic Analysis (BEA) with detailed measures of U.S. trade preferences from the U.S. International Trade Commission (USITC) to create a three-way panel that spans 80 industries, 184 countries, and ten years (1997-2006). Consistent with existing theory, we find that offshoring multinational activity and preferential market access are positively and consistently correlated, both in the pooled sample and within countries, industries, and years. Using both instrumental variables and simultaneous equations approaches to address the likely endogeneity of export-oriented foreign investment, we find that each $1 billion in U.S. foreign affiliate exports to the U.S. from a particular industry and country is associated with roughly a 3.5 percentage point increase in the rate of preferential duty free access. Restricting attention to the Generalized System of Preferences (GSP), the dollar-for-dollar influence of multinational affiliate sales on preferential market access declines by roughly a third for the overall sample, but rises by more than an order of magnitude when we restrict attention to potentially GSP eligible countries.

Suggested Citation

  • Emily Blanchard & Xenia Matschke, 2012. "U.S. Multinationals and Preferential Market Access," CESifo Working Paper Series 3847, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3847
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    References listed on IDEAS

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    Cited by:

    1. Pinelopi K. Goldberg & Nina Pavcnik, 2016. "The Effects of Trade Policy," NBER Working Papers 21957, National Bureau of Economic Research, Inc.
    2. Gassebner, Martin & Gnutzmann-Mkrtchyan, Arevik, 2017. "Politicized Trade: What Drives Withdrawal of Trade Preferences?," Hannover Economic Papers (HEP) dp-612, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    3. Paul J.J. Welfens, 2015. "Transatlantisches Freihandelsabkommen EU-USA: Befunde zu den TTIP-Vorteilen und Anmerkungen zur TTIP-Debatte," EIIW Discussion paper disbei209, Universitätsbibliothek Wuppertal, University Library.
    4. Blanchard, Emily J., 2015. "A Shifting Mandate: International Ownership, Global Fragmentation, and a Case for Deeper Integration under the WTO," World Trade Review, Cambridge University Press, vol. 14(01), pages 87-99, January.
    5. Emanuel Ornelas, 2016. "Special and Differential Treatment for Developing Countries," CESifo Working Paper Series 5823, CESifo Group Munich.
    6. Osnago,Alberto & Rocha,Nadia & Ruta,Michele, 2015. "Deep trade agreements and vertical FDI : the devil is in the details," Policy Research Working Paper Series 7464, The World Bank.
    7. Paul J. J. Welfens, 2016. "Deriving the new quantity equation: an approach for a closed and an open economy," International Economics and Economic Policy, Springer, vol. 13(4), pages 549-561, October.
    8. repec:eee:ecolet:v:167:y:2018:i:c:p:10-13 is not listed on IDEAS
    9. Adams, Laurel & Régibeau, Pierre & Rockett, Katharine, 2014. "Incentives to create jobs: Regional subsidies, national trade policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 111(C), pages 102-119.
    10. Ara, Tomohiro & Ghosh, Arghya, 2016. "Tariffs, vertical specialization and oligopoly," European Economic Review, Elsevier, vol. 82(C), pages 1-23.
    11. Kyle Bagwell & Robert W. Staiger, 2016. "The Design of Trade Agreements," NBER Working Papers 22087, National Bureau of Economic Research, Inc.
    12. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    13. Blanchard, Emily J., 2014. "What global fragmentation means for the WTO: Article XXIV, behind-the-border concessions, and a new case for WTO limits on investment incentives," WTO Staff Working Papers ERSD-2014-03, World Trade Organization (WTO), Economic Research and Statistics Division.
    14. Bruce A. Blonigen & Matthew T. Cole, 2011. "Optimal tariffs with FDI : the evidence," Working Papers 201121, School of Economics, University College Dublin.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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