Lobbying for Multi-Dimensional Trade Agreements - The Role of Global Value Chains

Modern Preferential Trade Agreements (PTAs) are not about reciprocal tariff reduction but about non-tariff issues. However, most of the literature on trade policy lobbying focusses merely on lobbying for or against trade liberalization generally, thus ignoring these salient issues in current PTA negotiations. What then explains the proliferation of non-tariff issues in PTAs? This Paper attempts to close this gap by analysing lobbying for specific non-tariff issues in current PTAs, focusing on lobbying for investment protection, intellectual property rights protection, services liberalization, and digital trade. Building on firm-level economic theories of international trade, I argue that the expansion of these new issues can be explained by the increasing engagement of firms in global value chains (GVCs). As firms organize their production along GVCs, strategic non-tariff issues such as investment and intellectual property rights become more important. Similarly, services liberalization as well as digital trade flows become pivotal for managing the global production network and organize foreign affiliates. I test this argument analysing data from 35,000 lobbying filings from the United States Lobbying Disclosure Act, using a combination of quantitative text analysis and econometric techniques. In the first part, I employ “structural topic models” to retrieve the non-tariff issues that firms and associations lobby on. In the second part, I explain this lobbying on non-tariff issues by firm-level variables related to GVC engagement, such as the use of related party imports, firm size, productivity, and foreign direct investment. This Paper adds to the existing International Political Economy literature in two ways. First, it provides evidence for the increased lobbying of globally engaged firms as a primary explanation for the expansion of non-tariff issues in current PTAs. Second, it shows how automated text analysis can used to enhance our understanding of lobbying on international trade.