When Do Large Firms Actually Shape Trade Policy?

New research finds that whether lobbying raises or lowers tariffs depends on the structure of the industry

America’s current political upheaval surrounding free trade has brought trade policy preferences to the fore. While public discourse often focuses on the divide between labor and the C-suite, this debate misses another critical but overlooked cleavage: firms within the same industry are often divided over trade policy

This divide is rooted in firm-level differences. Large firms with greater capital resources and more competitive business models can pay the high fixed costs that offer them access to export markets and the ability to offshore production. Smaller firms, by contrast, tend to face intensified competition from imports without comparable market access.¹ Not all industries rely on global trade: in these sectors, large firms do not benefit from lower trade barriers, producing unified preferences for protectionism among all firms within these sectors. However, in industries characterized by intra-industry trade (IIT) or global value chain (GVC) participation, whether firms are large enough to benefit from global integration divides companies, with large firms favoring liberalization and small firms preferring protectionism. As a result, globally integrated industries can be internally fragmented along pro-trade and anti-trade lines.

Existing scholarship has largely explained the policy consequences of these divisions through a collective action framework. Large firms, with greater resources and organization, are better positioned to influence policy. Smaller firms struggle to rally resources and coordinate. As a result, the preferences of large firms are expected to determine policy.

Sujin Cha’s and Ian Osgoods’ 2025 article centers on how special interest institutions (SIIs) — domestic political rules that increase the access or influence of interest groups over policy makers — mediate the relationship between corporate trade policy preferences and policy outcomes. These include campaign finance laws that allow corporate contributions, lobbying regulations, and formal mechanisms for policy feedback. Cha and Osgood hypothesize that the effect of special interest institutions on trade policy depends on the structure of the industry. In industries without intra-industry trade or GVC integration, stronger special interest institutions lead to higher trade barriers. Conversely, in industries with IIT or offshoring, they produce lower barriers. They further expect that the trade-liberalizing effects of IIT and GVCs will be strongest where special interest institutions are most developed.

To test their theory, Cha and Osgood combine extensive data on tariffs and trade flows across millions of product-country-year observations. They draw on the World Integrated Trade Solution and BACI datasets, documenting intra-industry trade and GVC participation as a measure of industry preferences. To capture global value chain participation, they incorporate data from the OECD. Their primary measure of SSIs is based on corporate political contribution rules compiled by the International Institute for Democracy and Electoral Assistance.

The paper’s findings show that the effect of special interest institutions on trade policy are highly contingent on the level of intra-industry trade. In industries with low IIT, where firms are more uniformly threatened by imports, increasing the influence of special interest institutions leads to higher tariffs. In these contexts, organized interests are aligned in favor of protectionism, and institutional access reinforces this outcome.

The impact of high IIT on tariffs is strongest in environments with robust special interest institutions. Where firms have greater political access, increases in IIT are associated with significantly lower trade barriers, reflecting the influence of globally integrated firms. Where such institutions are weak, the liberalizing effect of IIT is more limited.

The analysis of GVC integration yields parallel results. In industries with low GVC participation, increasing the influence of special interest institutions leads to higher tariffs, as firms are more uniformly protectionist. But as GVC integration increases, this effect diminishes and can reverse, with institutions instead facilitating lower trade barriers. At the same time, the trade-liberalizing impact of GVC integration is strongest in contexts where SSIs are well developed. When firms have greater access to policymakers, globally integrated firms are better able to translate their preferences into policy outcomes. Overall, the findings demonstrate that SSI’s play a moderating role: they amplify the preferences of the most powerful firms within an industry.

Cha and Osgood show that special interest institutions allow the most organized and well-resourced actors to exert outsized influence over trade policy. However, this influence does not produce uniform outcomes. Instead, its effects depend on the structure of the industry and the relationship to foreign competition of the industry.

As trade policy continues to shift in response to evolving global supply chains and economic tensions, this framework helps explain why countries and particular industries adopt different levels of protectionism or liberalization. By accounting for variation in both political institutions and industry structure, it shows how similar pressures can produce divergent trade outcomes across countries and sectors.

1. Helpman, Elhanan, et al. “Export versus FDI with Heterogeneous Firms.” The American Economic Review, vol. 94, no. 1, 2004, pp. 300–16. JSTOR, http://www.jstor.org/stable/3592780. Accessed 14 Apr. 2026