Commerce, Coalitions, and Global Value Chains

• In Event: Firms in International Political Economy

Abstract

Global Value Chains (GVCs) have connected firms in increasingly complex networks within and across national borders. However, most political economy models assume away interdependencies in producers’ trade preferences and fail to explain pervasive trade coalitions based on production linkages. I propose a new theoretical framework to integrate GVCs into trade politics. Specifically, I offer a theory that explains the formation of trade preferences along GVCs. I argue that producers connected through the same GVC tend to share common interests that facilitate collective actions for trade liberalization. My theory therefore predicts the prevalence of GVC-induced political coalitions cutting across factors, industries, and firms. Empirically, I conduct one of the first tests of firms' GVC participation and their political activities. I compile firm-level supply chain datasets and construct original measures of GVC integration for all publicly listed firms in the US from 2003 to 2020. Joining these data with firm-level lobbying reports and estimating a series of network models, I find that domestic firms with common foreign partners tend to lobby together, hire the same lobbyist, and lobby on the same bill. Furthermore, GVC linkages between lead firms facilitate collective lobbying through broad-based trade associations. Finally, exploiting the Trade-in-Value-Added measures and network evolution models, I also find that GVC coalitions have dynamic effects on the formation of preferential trade agreement networks among 62 major economies from 2005 to 2015. Taken together, this paper provides new microfoundations for trade coalitions and challenges the common assumption about industries and firms as isolated political actors.

Author

• Hao Zhang, Princeton University