Buying Foreigners
Is the American Soft Power a Casualty of the Trade War?
Haichao Fan et al.
NBER Working Paper, April 2022
Abstract:
The US trade war against China in 2018–2019 can either enhance or diminish the US soft power in China, depending on whether it is recognized as legitimate by Chinese citizens. We study how the viewership of US movies — an important element of the US soft power — is affected by the trade war, utilizing variations across Chinese cities in the exposure to the Trump tariffs. We find a significant reduction in US movie revenue in regions more exposed to the Trump tariffs, but no corresponding reduction in the consumption of non-US movies. This is corroborated by a decline in online search for US movies, US tourist destinations, and US branded sports shoes. The aversion to US movies appears to persist at least to 2021. The effect is somewhat milder for more affluent people.
Good Names Beget Favors: The Impact of Country Image on Trade Flows and Welfare
Pao-Li Chang, Tomoki Fujii & Wei Jin
Management Science, forthcoming
Abstract:
This paper estimates the effects of time-varying consumer preference bias on trade flows and welfare. We use a unique data set from the BBC World Service Poll, which surveys (annually during 2005–2017 with some gaps) the populations of a wide array of countries on their views of whether an evaluated country is having a mainly positive or negative influence in the world. We identify the effects on consumer preference parameters due to shifts in these country image perceptions and quantify their general equilibrium effects on bilateral exports and welfare (each time for an evaluated exporting country, holding the exporting country’s own preference parameters constant). We consider five important shifts in country image: the George W. Bush effect, the Donald Trump effect, the Senkaku Islands Dispute effect, the Brexit effect, and the Good-Boy Canadian effect. We find that such changes in bilateral country image perceptions have quantitatively important trade and welfare effects. The negative impact of Donald Trump’s “America First” campaign rhetoric on the U.S.’s country image might have cost the United States 4%–5% of its total exports and welfare gains from trade. In contrast, the consistent improvement of Canada’s country image between 2010 and 2017 has amounted to more than 8% of its total welfare gains from trade.
Foreign Influence in US Politics
Marco Grotteria, Max Miller & Lakshmi Naaraayanan
University of Pennsylvania Working Paper, March 2022
Abstract:
We provide the first large-sample evidence of foreign influence in US politics, showing that meetings between foreign countries and legislators affect government resource allocation directly for countries and indirectly for firms. To do so, we introduce a comprehensive dataset of date-stamped meetings between foreign countries and individual US legislators, spanning 2000 to 2018 and covering 146 countries, 1,200 US legislators, and 10 Congresses. From this new dataset, three facts emerge: (1) foreign countries lobby most intensely for trade and the economy, (2) meetings are positively related to legislator lawmaking effectiveness and past employment connections with lobbyists while they are unrelated to political ideology, and (3) foreign countries maintain connections with all legislators even after they depart from committees that are important in allocating public resources. Using legislator deaths as a shock to connections, our estimates imply a per-meeting direct loss of US$5.7 million to countries in foreign aid and indirect loss to foreign firms in state subsidies and government contracts amounting to US$250,000. Overall, these results highlight the significance of foreign influence in the US and present new observations to guide work in economics, public finance, and political science.
The Impact of U.S.-China Tensions on U.S. Science
Ruixue Jia et al.
NBER Working Paper, April 2022
Abstract:
This paper studies how recent investigations of foreign influence in research have affected the productivity of U.S. scientists in the field of life sciences. Using data from PubMed and Dimensions during 2010–2020, we compare scientists who collaborated with scientists in China during 2010–2014 with those who collaborated with scientists in other countries outside the U.S. By studying the publication records for over 102,000 scientists during 2015–2020, we find that the investigations coincide with a decline in the productivity of scientists with previous collaborations with scientists in China, especially when the quality of publications is considered. The decline is particularly salient for the fields with more pre-investigation NIH funding and U.S.-China collaborations. We also provide suggestive evidence that our findings matter for the aggregate productivity by fields for both the U.S. and China.
Technology Protectionism and the Patent System: Evidence from China
Gaétan de Rassenfosse & Emilio Raiteri
Journal of Industrial Economics, March 2022, Pages 1-43
Abstract:
Governments have strong incentives to allow their inventors to free ride on foreign technologies. They can achieve this result by discriminating against foreigners in the patent system — by refusing to grant foreigners a patent for their inventions. International patent law treaties forbid this practice, which may lower the global innovation incentives and may hurt international trade. Using data on half a million inventions submitted to the Chinese patent office, we find robust evidence of anti-foreign bias in the issuance of patents in ‘strategic’ technology areas. Foreigners are about fifty per cent more likely to be refused a strategic patent than locals.
Inching toward Modernity: Industrial Standards and the Fate of the Metric System in the United States
Stephen Mihm
Business History Review, Spring 2022, Pages 47-76
Abstract:
That the United States stands almost alone among nations in its failure to adopt the metric system has long been blamed on conservative, reactionary forces. This paper argues against this interpretation, which passes for conventional wisdom in both academic and popular circles. It instead contends that attacks on the metric system in the late nineteenth and twentieth century originated with progressive engineers, entrepreneurs, and industrialists who had taken the lead in setting the nation's first industrial standards. Far from being backward-looking reactionaries, they enjoyed reputations as cutting-edge leaders in the development of the machine-tool industry, the railroads, and the metal-working industries. Many of them pioneered new methods of management that privileged rationality, efficiency, and systemic approaches; indeed, they strongly influenced the development of what became known as scientific management. These individuals deftly advanced their cause through the nation's political institutions, thwarting the metric cause.
Exporting Uncertainty: The Impact of Brexit on Corporate America
Murillo Campello et al.
Journal of Financial and Quantitative Analysis, forthcoming
Abstract:
We show that the 2016 Brexit Referendum had multi-faceted consequences for corporate America, shaping employment, investment, divestitures, R&D, and savings. The unexpected vote outcome led US firms to cut jobs and investment within US borders. Using establishment-level data, we document that these effects were modulated by the reversibility of capital and labor. American-based job destruction was particularly pronounced in industries with less skilled and more unionized workers. UK-exposed firms with less redeployable capital and high input-offshoring dependence cut investment the most. Our results demonstrate how foreign-born political uncertainty is transmitted across international borders, shaping domestic capital formation, and labor allocation.
The Trade Reform Wave of 1985-1995
Douglas Irwin
NBER Working Paper, April 2022
Abstract:
The decade from 1985 to 1995 was an unprecedented period of declining barriers to global trade. The reform wave was especially pronounced in developing countries where overvalued currencies were eliminated, quantitative import restrictions dismantled, and import tariffs reduced. What accounts for this remarkable transformation in policy? This paper focuses on how many of these restrictions were imposed for balance of payments purposes. As the benefits of managing payments imbalances through exchange rate adjustments rather than import controls came to be understood, economists in high-ranking government positions had the opportunity to shift policy in this direction. Perhaps surprisingly, special interests played little role in fostering the move to more open markets.
Currency Carry Trade by Trucks: The Curious Case of China’s Massive Imports from Itself
Xuepeng Liu et al.
Review of Finance, forthcoming
Abstract:
With capital controls, the standard financial market transactions needed for currency carry trade are hard to implement. Using detailed trade data reported by both the mainland Chinese and Hong Kong’s governments, we present evidence that indirect currency carry trade likely takes place via round-trip reimports. We also show that greater state control in terms of more state-owned firms does not reduce such “carry trade by trucks.”