IDEAS home Printed from https://ideas.repec.org/p/trr/wpaper/201008.html
   My bibliography  Save this paper

U.S. Multinationals and Preferential Market Access

Author

Listed:
  • 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 off- shoring 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 endogeneity of export-oriented foreign investment, we find that a 10% increase in U.S. foreign affiliate exports to the U.S. from a particular industry and country is associated with a 4 percentage point increase in the rate of preferential duty-free access. Restricting attention to the Generalized System of Preferences (GSP) among potentially eligible developing countries, we find that the influence of multinational affiliate sales on preferential market access more than triples.

Suggested Citation

  • Emily Blanchard & Xenia Matschke, 2010. "U.S. Multinationals and Preferential Market Access," Research Papers in Economics 2010-08, University of Trier, Department of Economics.
  • Handle: RePEc:trr:wpaper:201008
    as

    Download full text from publisher

    File URL: http://www.uni-trier.de/fileadmin/fb4/prof/VWL/EWF/Research_Papers/2010-08.pdf
    File Function: First version, 2010
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
    2. Blanchard, Emily J., 2010. "Reevaluating the role of trade agreements: Does investment globalization make the WTO obsolete?," Journal of International Economics, Elsevier, pages 63-72.
    3. Blanchard Emily J, 2007. "Foreign Direct Investment, Endogenous Tariffs, and Preferential Trade Agreements," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-52.
    4. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, Taylor & Francis Journals, pages 238-249.
    5. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, pages 708-722.
    6. Bhagwati, Jagdish N. & Brecher, Richard A. & Dinopoulos, Elias & Srinivasan, T. N., 1987. "Quid pro quo foreign investment and welfare : A political-economy-theoretic model," Journal of Development Economics, Elsevier, pages 127-138.
    7. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, pages 833-850.
    8. Magee Christopher S, 2003. "Endogenous Preferential Trade Agreements: An Empirical Analysis," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-19.
    9. Motta, Massimo & Norman, George, 1996. "Does Economic Integration Cause Foreign Direct Investment?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-783, November.
    10. Ozden, Caglar & Reinhardt, Eric, 2005. "The perversity of preferences: GSP and developing country trade policies, 1976-2000," Journal of Development Economics, Elsevier, pages 1-21.
    11. Daniel Lederman & Çaglar Özden, 2007. "Geopolitical Interests And Preferential Access To U.S. Markets," Economics and Politics, Wiley Blackwell, pages 235-258.
    12. Bombardini, Matilde & Trebbi, Francesco, 2011. "Votes or money? Theory and evidence from the US Congress," Journal of Public Economics, Elsevier, pages 587-611.
    13. Bombardini, Matilde & Trebbi, Francesco, 2011. "Votes or money? Theory and evidence from the US Congress," Journal of Public Economics, Elsevier, pages 587-611.
    14. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, pages 1135-1155.
    15. Bruce A. Blonigen & Matthew T. Cole, 2011. "Optimal tariffs with FDI : the evidence," Working Papers 201121, School of Economics, University College Dublin.
    16. Eric W. Bond & Raymond G. Riezman & Constantinos Syropoulos, 2013. "A strategic and welfare theoretic analysis of free trade areas," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 8, pages 101-127 World Scientific Publishing Co. Pte. Ltd..
    17. James M. DeVault, 1996. "Political Pressure and the U.S. Generalized System of Preferences," Eastern Economic Journal, Eastern Economic Association, vol. 22(1), pages 35-46, Winter.
    18. Kee, Hiau Looi & Olarreaga, Marcelo & Silva, Peri, 2007. "Market access for sale," Journal of Development Economics, Elsevier, pages 79-94.
    19. Ozden, Caglar & Reinhardt, Eric, 2005. "The perversity of preferences: GSP and developing country trade policies, 1976-2000," Journal of Development Economics, Elsevier, pages 1-21.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. 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.
    3. Emanuel Ornelas, 2016. "Special and Differential Treatment for Developing Countries," CESifo Working Paper Series 5823, CESifo Group Munich.
    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. 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, pages 102-119.
    6. Ara, Tomohiro & Ghosh, Arghya, 2016. "Tariffs, vertical specialization and oligopoly," European Economic Review, Elsevier, vol. 82(C), pages 1-23.
    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. Martin Gassebner & Arevik Gnutzmann-Mkrtchyan, 2017. "Politicized Trade: What Drives Withdrawal of Trade Preferences?," CESifo Working Paper Series 6762, CESifo Group Munich.
    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, pages 102-119.
    10. Kyle Bagwell & Robert W. Staiger, 2016. "The Design of Trade Agreements," NBER Working Papers 22087, National Bureau of Economic Research, Inc.
    11. Bruce A. Blonigen & Matthew T. Cole, 2011. "Optimal tariffs with FDI : the evidence," Working Papers 201121, School of Economics, University College Dublin.
    12. 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.
    13. 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.
    14. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    15. 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.

    More about this item

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:trr:wpaper:201008. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matthias Neuenkirch). General contact details of provider: http://edirc.repec.org/data/petride.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.