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Global value chains and the political economy of WTO disputes

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Abstract

This paper investigates how the rise of global value chains (GVCs) in international trade affects the political economy of trade disputes. It addresses the gap between the domestic and international politics of trade disputes, which is especially relevant in these times as populist nationalism favors protectionist forces. We advance the argument that firms face institutional disadvantages in opposing protectionist forces at home, as observed in how contesting firms fare in US anti-dumping cases. As a consequence, they have incentive to seek cross-border cooperation with firms along the supply chain to escalate the adoption of anti-dumping measures to WTO disputes. The paper implements a two-stage empirical strategy. First, we examine the political contestation around US anti-dumping cases ongoing in the WTO era that takes place in International Trade Commission (ITC) hearings. We observe that while these cases see significant opposition from firms relying on the imports of intermediate goods, most cases end in favor of petitioners supporting the imposition of anti-dumping duties. In a second step, we quantitatively analyze the effect of intermediate and GVC goods trade in products that are the subjects of anti-dumping cases on the incidence of a formal WTO dispute. The results suggest that the high costs of litigation at the WTO are often prohibitive relative to the volume of trade in question and pose an equally difficult challenge for firms seeking to overturn protectionist measures.

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Notes

  1. Washington Post, 19 January 2018.

  2. A notable exception is Davis and Shirato (2007)

  3. http://econ.worldbank.org/ttbd/gad/

  4. The number of cases is determined from the Temporary Trade Barriers Dataset (Bown 2014)

  5. For an informal guide to the process prepared by staff from the International Trade Commission’s Office of Investigations,see the Antidumping and Countervailing Duty Handbook, 14th Ed. (2015).

  6. In cases where this second condition is not fulfilled, the Department of Commerce will conduct a poll to determine the level of support for the petition.

  7. Petitioners are required to file both with the Department of Commerce and the ITC on the same day. The Department of Commerce decides for or against an investigation in response to the petition.

  8. The ITC communicates the findings of its preliminary investigation to the Department of Commerce within 45 days, and the Department of Commerce completes this stage within 115 days after that of the ITC.

  9. The Department of Commerce makes its final determination within 235 days of the filing of the petition. Within 45 days after the final determination of the Department of Commerce, the ITC also makes its final determination.

  10. Requests for inclusion must be filed with the ITC Secretary within 7 days of the ITC’s announcement in the Federal Register of its intention to investigate.

  11. This new case is at this point ‘complete’ and the records available as the ITC has only recently made its first determination that imports have caused ‘material injury.’

  12. Investigation Nos: 701-TA-560-561 and 731-TA-1317-1328, available on the ITC website.

  13. Investigation No: 731-TA-991. Transcript can be found on the ITC website.

  14. A flowchart of the US anti-dumping process can be found here: . Accessed October 31, 2018.

  15. http://econ.worldbank.org/ttbd/gad/

  16. The overall number of WTO disputes in which the US acted as respondent in the WTO period until 2015 was 49.

  17. https://relatedparty.ftd.census.gov/. Accessed 26 June 2017.

  18. http://wits.worldbank.org/referencedata.html

  19. https://wits.worldbank.org/referencedata.html

  20. https://data.worldbank.org/data-catalog/world-development-indicators

  21. http://www.systemicpeace.org/inscrdata.html

  22. https://comtrade.un.org/

  23. The same results hold for the interaction effect between Intermediate Good and (log) Imports of Product. It shows that Intermediate Good is insignificant over the entire range of (log) Imports of Product. The results are available on request.

  24. All other continuous variables are kept at their mean value while Obama is set to zero, Bush is set to one and the industry fixed effects are all set to zero such that the predicted probabilities illustrate a metal product.

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Authors and Affiliations

  1. National University of Singapore, Singapore, Singapore

    Soo Yeon Kim

  2. University of Salzburg, Salzburg, Austria

    Gabriele Spilker

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  1. Soo Yeon Kim
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  2. Gabriele Spilker
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Correspondence to Soo Yeon Kim.

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Kim, S.Y., Spilker, G. Global value chains and the political economy of WTO disputes. Rev Int Organ 14, 239–260 (2019). https://doi.org/10.1007/s11558-019-09350-4

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