Media Bias against Foreign Firms as a Veiled Trade Barrier a home bias,but this tendency is less pronounced in itoring and regulating protectionist behavior by inter- nonofficial newspapers located in the same provinces national institutions,which are not particularly effec- and among official newspapers in provinces without tive at addressing indirect or disguised protectionism any direct stake in the automotive industry. (Kim 2016;Rickard and Kono 2014).Compared to gov- I also provide evidence for the effect of home bias ernment procurement or health and safety policies,the on consumer behavior.Through the analysis of recall- use of news media is even more opaque,hindering ef- related web searches,I find that recalls of foreign cars fective regulation.Even if governments were to make receive more public attention than those of domestic an unlikely commitment to ensure equal treatment of cars.The effect of recalls on automobile sales is also foreign goods in media coverage,it would be almost negative for foreign automakers,while the recall effect impossible for international institutions to enforce. for domestic firms is ambiguous.My analysis demon- The next section further discusses the broader litera strates that news coverage largely accounts for why for- ture on protectionism and outlines theoretical expecta- eign firms face more negative consequences from their tions regarding the sources of home bias in the media. recalls. I then describe my empirical strategy and dataset.The The finding has direct implications for challenges following section presents the findings and a series of faced by automakers in the world's largest automo- robustness tests,followed by an analysis on the pos- bile market.China's accession to the WTO in 2001 at- sible effects of home bias on consumer behavior.The tracted keen interest from global automakers due to its final section discusses the applicability of my findings enormous and fast-growing market.Despite its com- beyond China,as well as related implications for the mitment to tempering its protectionist policies,how- study of regime type and trade policy ever,the Chinese government has demonstrated a con- tinued interest in promoting its automobile industry (Gerth 2012).In fact,opening its market resulted only EXPLAINING HOME BIAS IN THE MEDIA in a sluggish increase in automobile imports,from 2.2% 4r元 of total car sales in 1998 to 5.9%in 2012,despite the Building on the literature on protectionism,I provide reduction of Chinese tariffs on vehicles from 101.1% the government-centered explanation of the home bias (1996)to 25.0%(since 2007).-This is partly due to the in the media.Namely,the media bias reflects the gov- presence of joint ventures,but my findings also provide ernment's incentive to employ less visible trade barri- a potential explanation for this phenomenon,namely ers without violating the rules of international trade that encouraging Chinese consumers to purchase Chi- institutions.Alternatively,the home bias may reflect the nationalist sentiment of readers.I discuss these nese products "violate[s]neither the WTO rules nor the market economic rules,"as asserted by the former two potential sources of media bias,in turn,and de- chief negotiator for China's WTO accession (Gerth rive observable implications for testing the existence 2012,213).The utilization of government-controlled of government-driven bias. media provides one such channel for influencing con- sumer decisions. The Argument:News Media as a More broadly,this article contributes to the study of Protectionist Measure international political economy by expanding the dis- cussion of NTBs.While previous research has focused International trade agreements have made imposing on ways governments can directly affect demand,sup- tariffs costly,and the use of NTBs as substitutes has ply,and prices of domestic and foreign goods(Naoi become more pervasive over the past few decades 2009;Rickard 2012),this article illuminates an indirect (Kono 2006:Mansfield and Busch 1995).Those alterna- protectionist mechanism through which governments tive strategies have themselves become costlier,how- affect the flow of product-related information.Individ- ever,as the WTO and other international trade agree- ual consumers play a significant role in international ments have caught on to this trend(Rickard and Kono trade relations,since their demand for domestic and 2014;Staiger 2012).For instance,the WTO significantly foreign products ultimately determines the trade flow. strengthened national treatment obligations through Government's attempts to indirectly foster a consumer the Technical Barriers to Trade Agreement and the preference for domestic products could constitute a se- Sanitary and Phytosanitary Measures Agreement,both rious barrier to trade. of which require member states to treat imported and This article also provides an implication for the effec- locally produced goods equally(Staiger 2012). eys tiveness of international trade institutions.The findings The costs of violating these rules may not be pro suggest that states can pursue concealed measures to hibitive,but member states are certainly discouraged protect domestic industries when trade policy is oth- from employing visible protectionist instruments.Since erwise constrained.Indirect measures might not be as the inception of the WTO,the use of a dispute set- effective as direct measures such as tariffs or quotas. tlement mechanism has become very common,espe- However,they may exacerbate the difficulties of mon- cially with regard to subsidies,countervailing mea- sures,and antidumping duties.The accused country needs to correct its protectionist practices once they are The tariff is based on the HS-code 8703 (motor cars and other vehicles principally designed for the transport of persons)from the ruled WTO-inconsistent,and it also pays a reputational WTO Tariff databases.The import rate is the author's own calcula- cost when its violations become widely known(Maggi tion based on the China Auto Market Almanac series. 1999),on top of the monetary cost of engaging in 955Media Bias against Foreign Firms as a Veiled Trade Barrier a home bias, but this tendency is less pronounced in nonofficial newspapers located in the same provinces and among official newspapers in provinces without any direct stake in the automotive industry. I also provide evidence for the effect of home bias on consumer behavior. Through the analysis of recall￾related web searches, I find that recalls of foreign cars receive more public attention than those of domestic cars. The effect of recalls on automobile sales is also negative for foreign automakers, while the recall effect for domestic firms is ambiguous. My analysis demon￾strates that news coverage largely accounts for why for￾eign firms face more negative consequences from their recalls. The finding has direct implications for challenges faced by automakers in the world’s largest automo￾bile market. China’s accession to the WTO in 2001 at￾tracted keen interest from global automakers due to its enormous and fast-growing market. Despite its com￾mitment to tempering its protectionist policies, how￾ever, the Chinese government has demonstrated a con￾tinued interest in promoting its automobile industry (Gerth 2012). In fact, opening its market resulted only in a sluggish increase in automobile imports, from 2.2% of total car sales in 1998 to 5.9% in 2012, despite the reduction of Chinese tariffs on vehicles from 101.1% (1996) to 25.0% (since 2007).2 This is partly due to the presence of joint ventures, but my findings also provide a potential explanation for this phenomenon, namely that encouraging Chinese consumers to purchase Chi￾nese products “violate[s] neither the WTO rules nor the market economic rules,” as asserted by the former chief negotiator for China’s WTO accession (Gerth 2012, 213). The utilization of government-controlled media provides one such channel for influencing con￾sumer decisions. More broadly, this article contributes to the study of international political economy by expanding the dis￾cussion of NTBs. While previous research has focused on ways governments can directly affect demand, sup￾ply, and prices of domestic and foreign goods (Naoi 2009; Rickard 2012), this article illuminates an indirect protectionist mechanism through which governments affect the flow of product-related information. Individ￾ual consumers play a significant role in international trade relations, since their demand for domestic and foreign products ultimately determines the trade flow. Government’s attempts to indirectly foster a consumer preference for domestic products could constitute a se￾rious barrier to trade. This article also provides an implication for the effec￾tiveness of international trade institutions. The findings suggest that states can pursue concealed measures to protect domestic industries when trade policy is oth￾erwise constrained. Indirect measures might not be as effective as direct measures such as tariffs or quotas. However, they may exacerbate the difficulties of mon- 2 The tariff is based on the HS-code 8703 (motor cars and other vehicles principally designed for the transport of persons) from the WTO Tariff databases. The import rate is the author’s own calcula￾tion based on the China Auto Market Almanac series. itoring and regulating protectionist behavior by inter￾national institutions, which are not particularly effec￾tive at addressing indirect or disguised protectionism (Kim 2016;Rickard and Kono 2014). Compared to gov￾ernment procurement or health and safety policies, the use of news media is even more opaque, hindering ef￾fective regulation. Even if governments were to make an unlikely commitment to ensure equal treatment of foreign goods in media coverage, it would be almost impossible for international institutions to enforce. The next section further discusses the broader litera￾ture on protectionism and outlines theoretical expecta￾tions regarding the sources of home bias in the media. I then describe my empirical strategy and dataset. The following section presents the findings and a series of robustness tests, followed by an analysis on the pos￾sible effects of home bias on consumer behavior. The final section discusses the applicability of my findings beyond China, as well as related implications for the study of regime type and trade policy. EXPLAINING HOME BIAS IN THE MEDIA Building on the literature on protectionism, I provide the government-centered explanation of the home bias in the media. Namely, the media bias reflects the gov￾ernment’s incentive to employ less visible trade barri￾ers without violating the rules of international trade institutions. Alternatively, the home bias may reflect the nationalist sentiment of readers. I discuss these two potential sources of media bias, in turn, and de￾rive observable implications for testing the existence of government-driven bias. The Argument: News Media as a Protectionist Measure International trade agreements have made imposing tariffs costly, and the use of NTBs as substitutes has become more pervasive over the past few decades (Kono 2006;Mansfield and Busch 1995).Those alterna￾tive strategies have themselves become costlier, how￾ever, as the WTO and other international trade agree￾ments have caught on to this trend (Rickard and Kono 2014; Staiger 2012). For instance, the WTO significantly strengthened national treatment obligations through the Technical Barriers to Trade Agreement and the Sanitary and Phytosanitary Measures Agreement, both of which require member states to treat imported and locally produced goods equally (Staiger 2012). The costs of violating these rules may not be pro￾hibitive, but member states are certainly discouraged from employing visible protectionist instruments. Since the inception of the WTO, the use of a dispute set￾tlement mechanism has become very common, espe￾cially with regard to subsidies, countervailing mea￾sures, and antidumping duties. The accused country needs to correct its protectionist practices once they are ruled WTO-inconsistent, and it also pays a reputational cost when its violations become widely known (Maggi 1999), on top of the monetary cost of engaging in 955 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242