Foreign Bias, Fragmented Business, and the Unraveling of U.S.–China Economic Engagement

Abstract

Two decades after supporting China's accession to the World Trade Organization, the United States retreated from a longstanding paradigm of economic engagement, turning instead toward tariffs, export controls, and import bans against Beijing. Why did American business, once the bulwark of engagement, fail to prevent this unraveling? I argue that Chinese state capitalism produces foreign bias—host-state policies that systematically disadvantage foreign firms—and fractures firms' interests by their different modes of China exposure. Fragmentation runs not only across sectors but also within them, weakening business as a unified veto coalition and opening political space for status-quo challengers. Three empirical papers trace this sequence from its origin, through its political process, to its consequences. Chapter 2 examines one source of foreign bias: the politics of granting intellectual property rights (IPR) protection. It draws on millions of global patent records and an official crosswalk between patent technology classes and designated strategic areas. It shows that China systematically favors domestic applicants in strategic sectors—a strategy I call patent gatekeeping—while modernizing foreign treatment in non-strategic areas. Chapter 3 examines the political process through which foreign bias is channeled into congressional politics: business lobbying. It measures firm-level interests from 58,960 SEC filings using large language models (LLMs) and links them to legislators through lobbying-network data. It shows that firm-level grievances against China’s discriminatory policies, not import shocks, have driven trade-critical rhetoric in Congress from 2001 to 2022, while import-reliant firms have been important defenders of the trade regime. Chapter 4 examines the political consequence of this business fragmentation: the opening up of political space for status-quo challengers. It process-traces the Uyghur Forced Labor Prevention Act with elite interviews and congressional documents. It shows how constrained business mobilization, institutionally embedded diasporas, and agenda forcers lead to the passage of one of the most significant import-ban bills in recent years. Together, this dissertation offers an international-political-economy account of the end of engagement that is based on neither electoral backlash nor leader idiosyncrasy. It challenges trade-politics models that treat firms' preferences as exogenous to the host-state's institutional environment, showing when foreign bias can galvanize firms to lobby to put pressure on the trade regime. It introduces novel text-based measures taking advantage of financial disclosures and LLMs, and network-based measures that bridge firm preferences to legislators' behavior, both of which have wide-ranging applications to the fields of international political economy and foreign policymaking.