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Inter-sectoral Goods Market Relationships, International Capital Mobility, and US Trade Politics

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Abstract:

Does sale or purchase dependency between sectors have any effect on the demand side of trade politics in the era of increased cross-border capital mobility? I will investigate how a given sector?s sale or purchase dependency on its business partner sectors may affect the former?s political lobbying efforts when the latter receive FDI (foreign direct investment) and expand production. Inter-sectoral sale or purchase dependency implies economic power or influence of a given sector upon another. As one sector is more dependent on another in selling outputs or procuring inputs, expanded production after inward FDI in the latter will affect the fortune of the former. Previously, the international political economy literature focused on how a changing level of capital mobility in a given sector influences the sector?s trade policy preference. US firms engaging in outward FDI overseas are more supportive of liberal trade policy (Helleiner 1977), and inward FDI deters local firms? tariff-seeking efforts (Bhagwati et al. 1987). Recently, Hiscox (2004) argues that a given sector that employs less internationally mobile capital is more likely to demand protection when other sectors have a high level of cross-border capital mobility. I argue that inter-sectoral sale or purchase dependency will affect the impact cross-border capital mobility has on local trade politics in a differentiated way. When a sector sells a large portion of its sales to other sectors, inward FDI in the latter will imply more demand for the products of the former. Then the seller sector is less likely to lobby because the FDI will benefit it by selling more goods than before unless the buyers procure their additional inputs from imports. When seller sectors receive inward FDI and expand production, a buyer sector will have an opportunity to procure inputs cheaper than before. The more a buyer sector procures inputs from its seller sectors, the less the buyer will be likely to lobby for protection because inward FDI in the seller sectors favors the buyer?s business. Theoretically, I will employ the industry-level interest group politics model following the Ricardo-Viner theorem. Empirically, I will test the hypotheses with a quantitative analysis using sectoral Input-Output and FDI data from the Commerce Department as independent variables, and each sector?s campaign contributions and anti-dumping petitions to the International Trade Commission between 1981 and 1990 as dependent variables.
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Name: International Studies Association 48th Annual Convention
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MLA Citation:

Lee, Hak-Seon. "Inter-sectoral Goods Market Relationships, International Capital Mobility, and US Trade Politics" Paper presented at the annual meeting of the International Studies Association 48th Annual Convention, Hilton Chicago, CHICAGO, IL, USA, Feb 28, 2007 <Not Available>. 2009-05-24 <http://www.allacademic.com/meta/p178588_index.html>

APA Citation:

Lee, H. , 2007-02-28 "Inter-sectoral Goods Market Relationships, International Capital Mobility, and US Trade Politics" Paper presented at the annual meeting of the International Studies Association 48th Annual Convention, Hilton Chicago, CHICAGO, IL, USA <Not Available>. 2009-05-24 from http://www.allacademic.com/meta/p178588_index.html

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Does sale or purchase dependency between sectors have any effect on the demand side of trade politics in the era of increased cross-border capital mobility? I will investigate how a given sector?s sale or purchase dependency on its business partner sectors may affect the former?s political lobbying efforts when the latter receive FDI (foreign direct investment) and expand production. Inter-sectoral sale or purchase dependency implies economic power or influence of a given sector upon another. As one sector is more dependent on another in selling outputs or procuring inputs, expanded production after inward FDI in the latter will affect the fortune of the former. Previously, the international political economy literature focused on how a changing level of capital mobility in a given sector influences the sector?s trade policy preference. US firms engaging in outward FDI overseas are more supportive of liberal trade policy (Helleiner 1977), and inward FDI deters local firms? tariff-seeking efforts (Bhagwati et al. 1987). Recently, Hiscox (2004) argues that a given sector that employs less internationally mobile capital is more likely to demand protection when other sectors have a high level of cross-border capital mobility. I argue that inter-sectoral sale or purchase dependency will affect the impact cross-border capital mobility has on local trade politics in a differentiated way. When a sector sells a large portion of its sales to other sectors, inward FDI in the latter will imply more demand for the products of the former. Then the seller sector is less likely to lobby because the FDI will benefit it by selling more goods than before unless the buyers procure their additional inputs from imports. When seller sectors receive inward FDI and expand production, a buyer sector will have an opportunity to procure inputs cheaper than before. The more a buyer sector procures inputs from its seller sectors, the less the buyer will be likely to lobby for protection because inward FDI in the seller sectors favors the buyer?s business. Theoretically, I will employ the industry-level interest group politics model following the Ricardo-Viner theorem. Empirically, I will test the hypotheses with a quantitative analysis using sectoral Input-Output and FDI data from the Commerce Department as independent variables, and each sector?s campaign contributions and anti-dumping petitions to the International Trade Commission between 1981 and 1990 as dependent variables.

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