- Published Article
- “Providing Protection: Agricultural Support and Flexibility of Preferential Trade Agreements in Democracies”
- “Third Parties as Amicus Curiae: Do They Contribute to the Legalization of the WTO?”
- “Corporate Lobbying, Industries Competition, and the Preferential Trade Agreements: Evidence from the U.S.”
- Works in Progress
- “The Effect of Economic Sanctions on Companies’ Foreign Direct Investment Decisions: The Case of Sanctions against Russia” (with Elena V. McLean and Taehee Whang)
- “IMF Conditionality and the Foreign Direct Investments” (with Randall W. Stone)
- “Predicting FDI Inflows: Exploring a Non-linear Relationship Between Peace Years, Natural Resources, and Rule of Law” (with Hye-Sung Kim )
- “Examining Causal Mechanisms between Ethnic Diversity and Public Goods Provision: A Conjoint Analysis.” (with Hye-Sung Kim )
“Plaintiffs by Proxy: A Firm-level Appraoch to WTO Dispute Resolution” (with Randall W. Stone) | The Review of International Organizations 2018. 13(2): 273-308.
Lobbying by multinational business firms drives the agenda of international trade politics. We match Fortune Global 500 firms to WTO disputes in which they have a stake and to their political activities using public disclosure data. The quantitative evidence reveals traces of a principal-agent relationship between major MNCs and the US Trade Representative (USTR). Firms lobby and make political contributions to induce the USTR to lodge a WTO dispute, and once a dispute begins, firms increase their political activity in order to keep USTR on track. Lobbying is overwhelmingly patriotic—the side opposing the US position is barely represented—and we see little evidence of MNCs lobbying against domestic protectionism. When the United States is targeted in a dispute, lobbying by defendant-side firms substantially delays settlement, as the affected firms pressure the government to reject concessions. Lobbying on the complainant side does not delay dispute resolution, as complainant-side firms have mixed incentives, to resolve disputes quickly as well as to hold out for better terms.
“Providing Protection: Agricultural Support and Flexibility of Preferential Trade Agreements in Democracies”
In this chapter, I examine how domestic political forces affect the institutional design of preferential trade agreements (PTAs). What explains the variations in escape clauses in trade agreements? This article examines how agricultural support affects the design of preferential trade agreements (PTAs). I hypothesize that democratic political elites with survival incentives choose more flexible trade agreements as they are concerned more about domestic agricultural sectors. Flexible design of treaties enables members to shirk their contractual duties temporarily and can be often used as protectionist measures. To validate this argument, I construct a measure of flexibility using a Bayesian item response theory that treats flexibility as a latent characteristic of trade agreements. With this index and panel data covering 648 PTAs signed from 1948-2017, I find that political leaders are more likely to introduce flexibility provisions when entering into trade agreements as they confer more agricultural subsidies to farmers. In addition to providing a continuous index to measure PTA flexibility, the article introduces a robust predictor of trade agreement flexibility that has been overlooked in previous work.
“Third Parties as Amicus Curiae: Do They Contribute to the Legalization of the WTO?”
The WTO judicial bodies face dual obstacles because of their limited legal authority: they do not have the authority to investigate members, so they depend primarily on submissions by the disputants; and they have no authority to sanction members directly, so they rely on decentralized enforcement. Legalization of the trade regime depends on consent and voluntary compliance. This paper focuses on the role of third parties in the dispute settlement process and investigates how they contribute to the legalization of the WTO. I use an original dataset, covering all WTO disputes from 1995 to 2012, which contains unusually detailed information about the number of third parties, total dispute settlement period, the final stage that disputants use, etc. In contrast to the existing literature, which characterizes third parties as spoilers that prevent early settlement, I find that WTO third parties have heterogeneous motivations for participation; moreover, participation by third parties with differing motivations has different effects on dispute settlement and compliance. In particular, third parties that claim to have “systemic interests”–a legal designation that allows them to participate in spite of having negligible trade states in a dispute–have considerable influence in dispute resolution. Specifically: (1) their briefs provide higher-quality information than other third-party briefs to panels and the Appellate Body; (2) they help to accelerate dispute settlement; and (3) their participation makes respondents more likely to comply with panel and Appellate Body rulings.
“Corporate Lobbying, Industries Competition, and the Preferential Trade Agreements: Evidence from the U.S.”
I focus on how domestic corporate political activities affect the level of liberalization and the flexibility of trade agreements. In this essay, I explain the depth and flexibility of trade agreements from the perspective of demand-side policymaking. According to the standard trade theory, import-competing firms are harmed by trade liberalization because free trade increases market competitions. They thus want their governments to impose high tariffs on imported products or to introduce more flexibility provisions. Exporting firms support trade liberalization because they want to have access to foreign markets. Overall, optimal levels of trade liberalization and flexibility is determined by the relative political power of these two groups of firms. I argue that agricultural industries still play a decisive role in the design of trade agreements because of their political influences.
Works in Progress
“The Effect of Economic Sanctions on Companies’ Foreign Direct Investment Decisions: The Case of Sanctions against Russia” (with Elena V. McLean and Taehee Whang)
Countries resort to economic coercion to compel other countries to change their policies. The success of this strategy depends on the size of economic costs that sanctioners can impose on their opponents by distorting trade and financial flows. Yet, existing studies indicate that governments and companies can adjust to such distortions, thereby reducing effectiveness of economic coercion. Specifically, research on sanctions’ effect on foreign direct investment indicates that sanctioning countries’ companies reduce their investments in targeted countries only temporarily, whereas companies from third-party countries take advantage of this temporary reduction by increasing their investment levels in targeted countries. The key limitation of this research, however, is its country-level focus, which fails to capture company-level decisionmaking processes and factors shaping them. In this paper, we consider how sanctions affect companies’ decisions to invest in a targeted country and how companies respond to the risk of investment substitution from third-party countries. We investigate effects of sanctions announced by companies’ home governments, as well as other governments, and consider varying responses of companies in different economic sectors. To keep our models tractable, we concentrate on one sanctioned country, Russia, and use monthly data on nearly 3,000 companies from 77 countries to evaluate companies’ decisions to invest in Russia’s economy, from January 2003 to September 2017. This period includes a series of sanctions imposed against Russia by the US, EU members and other countries, as well as Russian counter-sanctions. Our results show that sanctions reduce the likelihood of new investments in Russia.
“IMF Conditionality and the Foreign Direct Investments” (with Randall W. Stone)
What explains the location choice of foreign direct investments from Korean multinational corporations (MNCs)? Korean firms have made foreign investments over the last four decades and their investments are unevenly distributed around the world. Which aspects in the host countries influence the variations in the investment decisions? In this paper, we explore the determinants of investment decisions at the firm level, using data on 11,490 unique Korean firms’ foreign investments around the world gathered by the Export-Import Bank of Korea. Existing literature suggests that political institutions that protect property rights are generally considered to reduce the transaction costs, thereby disincentivizing firms’ rent-seeking activities. Indeed, some firms prefer fewer political constraints and instability in the host country, whereas others are deterred by such conditions and seek institutionally stable ones for the protection from expropriation. Focusing on host country’s political constraints to capture changes in institutions, we investigate how Korean firms’ investments are attracted by host countries’ political constraints.
“Predicting FDI Inflows: Exploring a Non-linear Relationship Between Peace Years, Natural Resources, and Rule of Law” (with Hye-Sung Kim )
Despite active research on the effects of peace, natural resources and rule of law on FDI inflows, there is no consensus on their effects on FDI. This paper empirically tests competing hypotheses that have generated contrasting results regarding the effects of peace, natural resources and rule of law by applying generalized additive models (GAMs) to the data of non-OECD countries between 1970 and 2009. Our findings suggest that both for resource rich or resource poor countries, long established peace is critical in attracting FDI inflows, while the effects of rule of law depend on countries’ natural resource endowments. Somewhat surprisingly, natural resource rich countries receive more FDI inflows when they have ‘weak’ rule of law rather than ‘strong’ rule of law. Natural resource poor countries, on the other hand, tend to receive more foreign investments if they have moderately strong, but not too strong, rule of law. Our findings are substantively quite robust to different measures of natural resources and rule of law.
“Examining Causal Mechanisms between Ethnic Diversity and Public Goods Provision: A Conjoint Analysis.” (with Hye-Sung Kim )
In this paper, we examine multiple causal mechanisms between ethnic diversity and public goods provision. In particular, we identify the relative causal effects of various attributes of ethnic diversity on individual contribution to public goods by conducting a fully randomized conjoint analysis for Indian respondents. By doing so, we examine which attribute influences individual behaviors the most among various attributes of the ethnically diverse community, namely, the difference in preferences across ethnic groups, a community’s ability to sanction through enforcement, its ability to sanction through shame and reputation, the ethnicity of leaders, and how the authority of the leadership is granted. Contrary to the understanding in the existing literature, we do not find a community’s ability to sanction either through enforcement or reputation or shame are effective in influencing individuals’ willingness to contribute public goods. Rather, the type of public goods and whether the leader is one’s coethnic or not have the largest influence on individual willingness to contribute public goods.