The Role of American Multinationals in the China Trade War

• In Event: The Mircrofoundations of the US-China Trade War

Abstract

China has been consistently ranked as one of the most favored investment destinations for American multinational corporations (MNCs) since its accession to the WTO. Yet, in recent years, many of these multinationals have become increasingly pessimistic about doing business in China and vocal critics of Chinese industrial policy. The Trump administration’s trade action against China was initiated after an investigation found China to be "conducting unfair trade practices related to technology transfer, intellectual property, and innovation" under Section 301 of the Trade Act of 1974. Despite the president’s populist rhetoric about the unfair trade deficit and lost American jobs, these actions seem to reflect the interests of American MNCs operating in China more so than import-competing firms or workers in the United States. This paper examines the political participation of American MNCs in the shaping of US trade policy towards China. The analysis draws on a comparison of two new datasets. The first identifies the industry (2-digit NAIC) and policy position of American MNCs in China using a collection of AmCham China white papers from 2009-2018. The second identifies the firm, industry, presence in China, and policy position of the 121 witness testimonies and 295 rebuttal submissions to the USTR’s Section 301 hearings held in 2018. I track how many industry-issues (ex. 51- Market Access for Telecom and Internet Services) raised in the AmCham white papers are reflected in the Section 301 hearings. This analysis reveals the industry and policy cleavages that divide American MNCs over trade policy with China and the extent to which overseas American MNCs shaped the administration’s position compared to those of import competitors as well as exporters at home.

Author

• Jiakun Zhang, University of Kansas