Multilateral restrictions on industrial policy: the impact of eliminating local content requirements in the automotive sector

Abstract

This thesis concerns the role of the state in industrial development and structural transformation, in the context of multilateral restrictions on trade and investment policy space. More specifically, it examines the elimination of local content requirements (LCRs) in the automotive sector by 16 developing countries, as required by the WTO’s Agreement on Trade-Related Investment Measures. My focus is on the complex, dynamic causal processes that govern the economic geography of production, trade and investment, and the implications of the elimination of LCRs on those processes.In order to explore this issue, I employ a mixed method approach to empirical impact evaluation. I examine how the elimination of LCRs has impacted a number of key variables relating to production, trade and investment, using two methodological tools: ‘difference-in-difference’ panel regression, and comparative case studies. Possibilities for empirical research emerged from a ‘natural experiment’ – in which a number of countries were exogenously compelled to remove LCRs – coupled with the passing of sufficient time to allow long term impacts to be realised. This mixed approach entails progression from a simple panel regression model aimed at identifying and quantifying the ‘global’ impacts of the policy restriction on the 16 countries subject to the elimination of LCRs, to a more expansive treatment of the complex factors that determine case-specific outcomes, and the mechanisms through which they operate, through historical institutionalist, comparative case studies.The key finding is that contrary to the more pessimistic expectations, liberalising countries appear, on balance, to have exhibited significantly improved industrial performance outcomes: controlling for relevant covariates, output levels have not fallen while exports have increased dramatically. However, the cases examined here had a number of strong advantages going into liberalisation, suggesting that positive outcomes may not be broadly generalisable. The benefits of integration into global networks are unevenly distributed across structurally diverse countries, while across the cases examined here, countries continue to pursue alternative means through which to promote domestic production, the effects of which are difficult to separate from wider processes of liberalisation and developments in the structure of global value chains.

Date of Award	30 Jun 2016
Original language	English
Awarding Institution	University of Bath
Supervisor	James Copestake (Supervisor), Aurelie Charles (Supervisor), Turan Subasat (Supervisor) & Kerry Papps (Supervisor)