FRAGMENTING GLOBALIZATION: The Politics of Preferential Trade Liberalization in China and the United States | By Ka Zeng and Xiaojun Li

The world economy has experienced simultaneously contrasting trends of globalization and deglobalization over the past decade. On one hand, the manufacturing of consumer goods relies increasingly on a global network of production and service partners. The continued flow of raw materials, parts and components, and finished products across national borders contributed to the expansion of global value chains. On the other hand, deglobalization has been on the rise after the election of Donald Trump in 2016. This led to the United States’ withdrawal from the Trans-Pacific Partnership (TPP) negotiations, imposition of a series of punitive tariffs against foreign products, and a policy shift from multilateral free trade agreements to bilateral trade deals.

Against the backdrop of the world’s shifting economic tides, Ka Zeng and Xiaojun Li present a timely study of how global economic integration shapes businesses’ stances on free trade policy. Their work focuses on the positions of Chinese and American firms within global production networks and probes into the firms’ preferences and lobbying activities for trade liberalization. The central argument of this book can be summarized in one sentence, that is, firms integrated into global value chains (GVCs) are more inclined to support preferential trade agreements (PTAs). The authors also elaborate on the various factors influencing firm preferences for PTAs, which include business linkages with partner or excluded countries, the scope and depth of the PTAs, as well as the associated costs and benefits. Methodologically, this book combines in-depth case studies with statistical estimations and draws on extensive firm-level and national data collected through fieldwork, survey, and large-scale business databases. By accentuating the “evolving pattern of firm and industry demand for preferential trade liberalization, driven by the growing integration of trade, investment, and production activities in the global economy” (7), this book deepens our understanding of the role of businesses in the intricate relationship between international trade and domestic politics.

Organizationally, this book is structured to cater to readers without a background in international political economy or training in quantitative analysis. Its discussion starts with chapter 2 introducing the definitions and measurements of key concepts like GVC linkages and outlines the comparative framework utilized for analyzing Chinese and American business involvements in global value chains. In contrast to supply or commodity chain approaches, this value chain approach takes into consideration activities such as design and branding that create value for a product without involving physical change to the products (31), which the authors believe better captures the dynamics of contemporary transnational economic activities.

The four core chapters—chapters 3, 4, 5, and 6—offer meticulous and comprehensive examinations of the impact of GVCs on firm preferences and corporate lobbying for PTAs. Drawing on Chinese businesses’ experiences with two recent FTAs with South Korea and Austria, the authors show that firms even within an authoritarian context can still actively engage in both utilizing and advocating for PTAs. This proposition is substantiated by quantitative survey data in chapter 4, where the authors find that firms with substantial GVC linkages demonstrate strong support for deep PTAs, which contain, for example, strict intellectual property and investment protection, flexible trade remedies and dispute settlement, and low or zero tariffs (112).

Building on earlier chapters highlighting Chinese GVC-embedded firms’ preferences for trade liberalization, chapter 5 explores the firms’ proactivity in pursuing such trade arrangements, based on Fortune 500 companies’ lobbying activities for the TPP during 2006 to 2011. Notably, in light of China’s exclusion from the TPP negotiations, the authors discover evidence indicating that firms in industries with close GVC relations with non-PTA members, as in the case of the world’s largest tire producer Goodyear, exhibit less enthusiasm for supporting the trade arrangement (146).

Chapter 6 extends the authors’ theory to inter-region trade negotiations on a global scale. They posit that the likelihood of forming PTAs is higher between countries with closer GVC connections. They argue that once established, these PTAs tend to be more comprehensive, covering issues such as “tariff and nontariff liberation, investment protection and liberalization, as well as the harmonization of standards” (147–148). Through an examination of the role of European firms in EU-Asia trade negotiations, the authors demonstrate that global firms in Europe have played a pivotal role in advancing the EU’s FTA treaties with South Korea and Singapore. These firms have facilitated the implementation of the “Global Europe” strategy via organizations like Eurocommerce and the Foreign Trade Association (149, 155).

In terms of policy implications, this study raises interesting questions about how firms seek to influence the formulation of trade policy. However, as the authors rightfully acknowledge at the end of the book, their analysis is unable to reveal how precisely firms’ efforts translate into tangible policy outcomes. This is due in large part to the secretive and complicated nature of PTA negotiations, which usually involve multifaceted dimensions of concerns as well as parties with divergent interests. While firms undoubtedly play a crucial role, they are not the sole actors in the multiyear process. It remains unclear, in both a qualitative and quantitative sense, to what extent firm preferences can effectively shape the outcome of PTA negotiations. This book thus invites future research to investigate the internal policy dynamics that lead to final arrangements (183).

Nonetheless, Fragmenting Globalization utilizes a wealth of business datasets and performs rigorous quantitative and qualitative analysis to show how the proliferation of global production activity—as a fragmenting process of globalization—leads to intensive transnational business linkages, which ultimately reshape trade relations between countries. Beyond the substantive estimations, readers can also benefit from interesting case studies on US firms like Goodyear, UPS, and FedEx, as well as from informative online surveys of Chinese managers’ political strategies dealing with governments. Overall, this book makes a valuable contribution to the fields of trade policy, international business, and global economy. Its adept balance between empirical complexity, comprehensive literature review, and rich contextual information renders it accessible and beneficial for readers with varied background knowledge on this important topic.                             

Zhaojin Zeng

Texas A&M University-San Antonio, San Antonio