Navigating the Sanction Seesaw: How China Strategically Helps Firms Sanctioned in the US
The escalation of economic tensions between China and the US has become one of the major challenges to the global political economy and development. US unprecedented policy moves ranging from severe sanctions to chip exporting bans result in distinct reactions from the Chinese state and raise important questions in the study of the effectiveness of economic sanctions. Why do some economic sanctions induce acquiescence and compliance, whereas others have limited effect? I argue that the effectiveness of economic sanctions is contingent upon the degree of coordination between sanctioned firms and the target state. Firms that align with the strategic interests of the target state are more likely to receive subsidies and transfers to bail them out from foreign sanctions. By examining an original dataset of the universe of US-sanctioned Chinese firms and the relief they received in China, this paper shows that the Chinese state selectively compensates a subset of firms that contribute to China’s policy agenda to promote strategic sectors for industrial upgrading and military modernization. This project offers insights into the dynamic interactions among the sender state, the target state, and the target businesses and their impacts on the effectiveness of economic sanctions.
Following Peers and Competitors: How Business Managers Evaluate Firm Withdrawals from Russia (with Christina Davis and Sayumi Miyano)
States have long used economic sanctions in response to violations of international law as a strategy to restore order. Increasingly, we also observe firms that reject doing business with violators. In response to the war in Ukraine, hundreds of multinational corporations (MNCs) voluntarily withdrew from Russia, even when policymakers were still debating the extent of sanctions. Why did private firms halt their business? We argue that peer pressure and competition generate a strategic interaction in the response of firms to international crises. We test our hypotheses with a survey experiment on Japanese firm managers conducted during the first few months of the Russian invasion of Ukraine. First, we find that news about withdrawal by other firms creates peer pressure and increases support for firm withdrawal. Withdrawal by firms from a diverse range of countries has a larger impact. Second, we find that news about some firms continuing business with the sanction target generates competition concerns and lowers support for firm withdrawal. Our research provides insight into why business actors take political stances during international conflicts.
Shining Light on Regulatory Policies: The Impact of WTO Rulings on Firm Behaviors (with Christina Davis)
An effective international legal system not only resolves specific disputes but also deters future violations. This paper shows that WTO rulings reduce trade barriers at a systemic level and this deterrent effect is not confined to the parties involved in the dispute. Enforcement actions increase the credibility of the legal system and jurisprudence fills gaps in treaty interpretation. This implies that each ruling carries broader implications for other countries with similar policies, and we expect governments will adjust their behavior toward compliance. We empirically test this argument by analyzing the spillover effects of WTO rulings on other countries’ notification patterns. We examine original data from the Agreement on Sanitary and Phytosanitary Measures and the Technical Barriers to Trade Agreement that records thousands of notifications registered with the WTO each year by 135 countries from 1995 to 2022. Our analysis shows that countries with similar policies to those targeted in a WTO dispute are more likely to notify policy changes after the ruling. We conclude that WTO rulings incentivize related countries to update their perception of law and improve transparency over policy. The paper offers insights into how the multilateral trade rules govern non-tariff barriers and our findings present evidence that enforcement deters policy violations.