Globalizing Solar: Global Supply Chains and Trade Preferences

Abstract

Global production is increasingly organized through supply chains made up of firms that specialize in specific stages of production. This raises an important question: how does firms’ participation in global supply chains affect their trade preferences? Research shows that multinational corporations (MNCs) tend to prefer open trade, while domestic import-competing firms favor trade protection. We argue that the globalization of production also leads vertically specialized firms—those specializing in specific stages of the production process—to support open trade. Using firm-level data from the solar photovoltaics industry, we show that vertically specialized firms prefer open trade if they have ties to global supply chains. We present evidence that three sets of vertically specialized firms tend to favor open trade: upstream suppliers of inputs to a global supply chain, global manufacturers that import inputs, and downstream users of final products. Our findings suggest that the rise of global value chains shifts the politics of globalization: it expands firm coalitions in favor of open trade. Our findings also matter for an important public-policy concern: climate change. Governments face cross-cutting demands from solar firms over trade policy, dividing the growth coalition supporting clean energy technologies. Show more