In Fragmenting Globalization: The Politics of Preferential Trade Liberalization in China and the United States, Professor Xiaojun Li and Professor Ka Zeng (University of Arkansas) argue that global supply chain integration pits firms and industries that are more heavily dependent on foreign supply chains against those that are less dependent on intermediate goods for domestic production, leading to support for preferential trade liberalization. Li and Zeng show that the growing fragmentation of global production, trade, and investment is altering trade policy away from the traditional divide between export-oriented and import-competing industries through time series, cross-sectional analysis of the pattern of Preferential Trade Alliance formation by existing World Trade Organization members, a firm-level survey, and case studies of the pattern of corporate support for regional trade liberalization in China and the United States.
We spoke to Professor Li and Professor Zeng on their new book.
Can you tell us about your book in layman’s terms, for those who might not have extensive knowledge of IPE but want to learn more?
The rise of global supply chains is changing how we understand trade today. Most products are no longer made in one country and sold to another. Instead, raw materials, parts, components, and services cross national borders multiple times before being used to make final products that are sold on world markets. This book explores how firms up and down the supply chains pursue their interests through preferential trade agreements, such as the NAFTA and the Regional Comprehensive Economic Partnership, lobbying their governments to enter into agreements with their partner countries in order to take advantage of better market access and trade opportunities.
Where did the idea for this book come from? How does it relate to the rest of your research?
Dr. Ka Zeng from University of Arkansas, the coauthor of this book, is a long-term collaborator of mine. The idea of this book grew out of many conversations we had at conferences and workshops and builds on our prior works related to international trade and foreign direct investments.
How do you think the “growing fragmentation of global production, trade, and investment” will affect domestic and international trade policy? What insights does your book have for policy-makers?
The growing fragmentation of global production, trade, and investment will require us to rethink some of the prevailing theories of trade that focus on the division between export-oriented and import-competing industries. For policymakers, an important practical lesson is that growing supply chain linkages may create new domestic constituencies in favor of trade liberalization, which can in turn serve to dampen the potential fallout from the resurgence of protectionism in today’s global trading system.
How do you think the COVID-19 pandemic will affect global supply chain integration and globalization as a whole in the years to come?
The pandemic has significantly disrupted global supply chains and prompted many countries and firms to consider reorganizing their supply chains to mitigate such risks. In the foreseeable future, the pandemic will likely accelerate the so-called “balkanisation” of global supply chains, that is, the shrinking of production networks as firms move closer to consumer markets or back home in order to hedge against rising economic and political uncertainties.
What new avenues of research do you see your book opening up?
I am currently working on a SSHRC-funded project which is an extension of this book. The project will explore how multinational firms with extensive supply chain networks navigate the post-pandemic world and what roles governments can play in the process. You can find more details here: https://politics.ubc.ca/news/prof-xiaojun-li-receives-funding-for-investigation-of-global-supply-chains-in-a-post-pandemic-world/