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UC Berkeley UC Berkeley Electronic Theses and Dissertations Title The Political Economy of Global Sectoral Agreements in Information Technology, Telecommunications, and Finance Permalink https://escholarship.org/uc/item/3rb3p23h Author Park, Bora Clara Publication Date 2016 Peer reviewed|Thesis/dissertation eScholarship.org Powered by the California Digital Library University of California The Political Economy of Global Sectoral Agreements in Information Technology, Telecommunications, and Finance By Bora Clara Park A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Political Science in the Graduate Division of the University of California, Berkeley Committee in charge: Professor Vinod Aggarwal, Chair Professor Steven Vogel Professor Alison Post Professor Noam Yuchtman Summer 2016 The Political Economy of Global Sectoral Agreements in Information Technology, Telecommunications, and Finance Copyright 2016 By Bora Clara Park 1 Abstract The Political Economy of Global Sectoral Agreements in Information Technology, Telecommunications, and Finance By Bora Clara Park Doctor of Philosophy in Political Science University of California, Berkeley Professor Vinod Aggarwal, Chair This dissertation examines variation in the institutional design of the WTO sectoral agreements in IT, telecommunications, and finance. It aims to understand why and how states negotiated sectoral agreements and traces the source of state preferences to an industry’s core business and its major user industries. Going against the conventional wisdom, my analysis leads to three surprising findings. First, sectoral negotiations were not limited to the sector under discussion. They incorporated supplier (upstream) and user (downstream) industries in the global value chain, especially the preferences of user industries. Second, an industry’s global value chains changed the politics of lobbying by shaping the preferences of the firms along the chain and the coalitions they formed. Third, global value chains and industry coalitions affected the institutional design of these international accords in IT, telecommunications, and finance. I show how the number of user industries in the global value chains affected the scope, depth, and membership of sectoral agreements. Each empirical chapter examines the trade negotiations in the IT, telecommunications, and financial services industries. By analyzing multi-country, single-issue agreements, I show a clear pathway and mechanism through which firms utilize trade policies to better serve their large corporate clients. Global value chains, which maps the linkage of goods, services, capital, people, and information, is a specific type of complex interdependence that is evolving and affects every polity within the system. This approach can help answer new theoretical puzzles in international trade such as the rise of trade in services, minilateral agreements such as the TPP and the TTIP, and the effects of these developments for developing countries. It provides a framework with which to understand trade negotiations and raises new questions for scholars. i To my parents ii Acknowledgements I am in deep gratitude to my advisors, Vinod Aggarwal, Steven Vogel, Alison Post, and Noam Yuchtman. They have been an incredible source of inspiration, knowledge and support for my research project, and I am grateful for their mentorship. I have learned greatly from their dedication to research and teaching, and I hope to follow their examples in my academic career. I am especially grateful to Vinnie, from whom I learned everything I know about international trade. I am grateful for his patience and guidance throughout my training at Berkeley. To him I owe my greatest intellectual and professional debts. I thank my advisors at Cornell, Valerie Bunce, Matthew Evangelista, Viktor Tsyrennikov, Elizabeth Sanders, Manoj Thomas, and Melissa Thomas-Hunt, who have opened my eyes to academic research and have supported and guided me. I also thank David Collier, Ruth Collier, T.J. Pempel, Kevin O’Brien, Lowell Dittmer, Paul Pierson, Sean Gailmard, Peter Lorentzen, Jason Wittenberg, Ernesto Dal Bo, and Gerard Roland at Berkeley for their advice and support over the years. The generosity of the Joseph Leconte Goldsmith and Amy Seller Goldsmith Public Service Award and the Regents Fellowship at UC Berkeley gave me blissful years of research and writing, and I am grateful for their support. I also acknowledge the generous support I have received from the Foreign Language and Area Studies Fellowship and the Travers Department of Political Science. I thank my research assistants and students, especially Chris Hussey who helped me with data collection. I am grateful to my friends who have supported me over the years, near and far. From the department, I am especially thankful to Andrew Bertoli, Ryan Hubert, Daniel Mattingly, Katherine Michel, Sara Newland, Seung-Youn Oh, and Phil Rocco for helping me at various steps. At Berkeley, I am especially grateful to Eric Auerbach, Gillian Brunet, Satoshi Fukuda, Sanket Korgankor, and Vincenzo Pezone who have been my sounding board for research ideas over the years. I also thank officials in D.C. and beyond who took their time to share their insights and informed a young scholar. I am inspired by their dedication to public service. I am also grateful to the librarians at the Library of Congress. I would not be here without the love and support from my mom, dad, Jasmine, and Dan. You are the rock of my life. I dedicate my dissertation to my parents. iii Contents 1. Introduction…………………………………………………………………………. .1 2. A Theory of Global Value Chains and Trade Agreements…………………………. .9 3. Global Value Chains and the WTO Information Technology Agreement: Semiconductors and User Industries………………………………………….............. 35 4. The Multi-Sector Coalition behind the WTO Basic Telecommunications Agreement……………………….................................................................................. 54 5. The Globalization of Finance: The WTO Financial Services Agreement....... 69 6. Conclusion………………………………………………………..………………… 96 7. References…………………………………………………………………........…. 104 1 1. Introduction Who built the institutional infrastructure of globalization? How did the technological developments that fostered globalization spread around the world? Many scholars and popular writers argue that globalization grew out of technological changes that developed organically and eventually engulfed people, societies, and states around the world. Yet this organic view of globalization misses the pivotal role of trade agreements in opening countries to the free flow of goods and services in information technology, telecommunications, and finance, namely the 1996-97 World Trade Organization (WTO) sectoral agreements—the Information Technology Agreement (ITA), the Basic Telecommunications Agreement (BTA), and the Financial Services Agreement (FSA). Because of the WTO institutional rule that sectoral agreements have to cover at least 90% of world trade in each sector, these agreements were rather substantial in their scope and membership.1 The ITA’s 29 signatories were joined by 11 more members before implementation, which together accounted for 92.5% of world trade in IT products.2 The BTA’s 69 signatories accounted for 91% of global telecommunications revenue,3 and the FSA’s 102 signatories accounted for 95% of world trade in financial services.4 These agreements have lowered the costs of telecommunications services and IT products, laid and connected infrastructure for information flow, and allowed for the free movement of capital, goods, services, and people in high-technology sectors. The ITA removed tariffs in IT products, and more people now have access to cheaper IT goods such as computers and mobile phones. The BTA liberalized long-distance telecommunications services and online data transfer and storage services. The FSA allowed financial firms to enter foreign territories to set up subsidiaries and joint ventures with domestic financial firms. Then-WTO Director General Renato Ruggiero said that these agreements were “the essential infrastructure of the global economy of the 21st century.”5 While these agreements helped to create the institutional infrastructure of globalization, there is, surprisingly, no comparative study of these sectoral agreements in the literature.6 My dissertation analyzes the creation and development of sectoral agreements in high- technology industries between 1996 and 2015. The puzzles I address are: Why and with whom do countries sign sectoral agreements? What accounts for the variation in the institutional design of sectoral agreements—namely their scope, depth, and membership? The conventional wisdom is that a powerful state determines the features of the agreement and forces other countries to accept it. An institution-based argument predicts that technological changes make the existing regime inadequate to deal with new issues and that 1 The three largest economies—the US, EU, and Japan—controlled more than 75% of the world trade in these industries. 2 The 29 signatories in Singapore accounted for 83% of world trade in IT products. With 11 more countries, 40 countries, which accounted for 92.5%, agreed to implement the ITA in March 1997. See WTO News. 1997. Launching of Free Trade in Computer Products to Benefit Everyday Life of Consumers and Companies, says Ruggiero. March 27. https://www.wto.org/english/news_e/pres97_e/pr70_e.htm 3 WTO Telecommunications