Download Methodological critic of “Resisting the Protectionist Temptation

Methodological critic of
“Resisting the Protectionist Temptation:
Industry and the Making of Trade Policy in France and the United States
During the 1970s” by Helen Milner
1st comment paper
Designing Social Inquiry
Ayoung Kang (I32001)
14th of April, 2014
(1) Restate the author’s major research question and theories (or hypotheses) in “if, then”
type of generalization (here I want you to assess the author's IVs and DV);
① Background: 1970s had been hard time for most economies in the world. Generally,
it is believed that advanced countries raised trade barrier, mainly non-tariff barriers to
protect both import and export industries through many ways including export
subsidies and VER (Voluntary Export Restraints). Regulations under GATT were
ignored by many countries through 70s and 80s along with the increasing trading
blocs. However, the int’l system remained relatively liberal.
② Puzzle: why major industrial sectors of the advanced industrial states stayed open
despite the economic and political troubles of the 1970s?
③ Hypothesis: If international economic interdependence increases (in the form of
exports, multinational production, and global intra-firm trade) between advanced
industrial countries, it affects national preferences and trade policies to maintain a
liberal trade system by influencing the preferences of industries and firms.
④ IVs(Independent Variables)
 Economic interdependence including Export dependence, multinationality, and
foreign investment.
⑤ DV(Dependent Variable)
 Preferences for protectionism at the level of the firms and industries
(2) Assess the definitions the author had adopted for his independent and dependent variables
and whether they are adequately used.
 Protectionism: policy restricts or restrains international trade, often done with the
intent of protecting local businesses and jobs from foreign competition. It has broad
meaning as the author mentioned and RTA (Regional Trade agreement) can be
considered as new face of protectionism.1 However, in this article, Milner used
‘protectionism’ as a narrow meaning than general definition without defining it.
 Economic interdependence: In this paper, international economic interdependence
was explained and used as a broader concept in the form of exports, imports,
multinational production, and global intra-firm trade.
The author claimed while France was more trade dependent within the EC, the US
was more dependent on multinational firms and both countries relied upon trade
within those firms showed similar levels of integration into the international
economy.
1
Montej Abida(2013), The Regional Integration Agreements: A New Face of Protectionism
From this, we can tell that Milner considered increasing trade and multinational
production within the trading bloc, EC as the sign of interdependence which can
accelerate trade liberalization. However, it is hard to say that there is causality link
between trade liberalization and RTA membership.2 I think she had to point out that
she considered trade concentration within the region as economic integration into the
world economy.
 Export dependence: Certain level of export dependence accelerates open trade
regime, however this doesn’t mean that higher export dependence leads freer trade
policies. Most developing countries had much high export dependence about 35%
than advanced countries about 20% during 2000s.3 If we follow the logic of Milner,
developing countries should have been more active in formation of freer trade regime.
 Multinationality: it is appropriately used as multinational production mainly to
explain how much firms are globalized and benefit from production located in other
countries with cheaper, more abundant factors.
(3) Evaluate the procedures used in measuring variables and the tests devised to show causal
relationship between the author's IVs and DV (here I want you to critique the author's
selection of the cases.) Where the author’s method has shortcomings, show how it might have
2
World Bank, Faezeh Foroutan (1998), Does Membership in A Regional Preferential Trade Arrangement Make a Country More or Less
Protectionist?, p9
3
UNDP(2012), Export Dependence and Export Concentration, p21
been improved.
 controlling omitted variable bias
Milner selected 18 different industries under the highest levels of import competition and
economic difficulties to test causal relationship between IVs and DV. When import
competition is fixed at highest level, she examined their degree of integration into the int’l
economy and their trade policy preferences using data on their export dependence,
multinationality and intra-firm trade.
If import competition and other IVs including export dependence are not highly correlated, it
would have been better to use import competition as IVs. As import competition is one of the
important IVs, it would’ve been omitted variable bias if Milner does not hold this variable at
the constant level.
 Limited number of samples (#<20)
Though she solved the omitted variable bias by holding the crucial variables at fixed level,
she still had the problem as bigger number of cases can produce more precise correlation
between IVs and DV. However, the cases Milner used as the set of samples were only 18, less
than 20.
As Milner mentioned, for intermediate cases, preferences were complex as they wanted
limited or selective protection. She needed more cases to prove desired result. Thus, with the
small number of cases, it would be better solution to use samples can vary widely according
to the level of IV such as comparison between domestic firms and MNCs at the hightst levels
of import penetration to show clearer causality.