Hostname: page-component-78c5997874-j824f Total loading time: 0 Render date: 2024-11-20T00:07:12.304Z Has data issue: false hasContentIssue false
  • English
  • Français

The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes

Published online by Cambridge University Press:  22 July 2015

J. Bradford Jensen ,
Dennis P. Quinn  and
Stephen Weymouth
Get access

Abstract

We apply insights from “new, new” trade theory to explain a puzzling decline in US firm antidumping (AD) filings in an era of persistent foreign currency undervaluations and increasing import competition. Firms exhibit heterogeneity both within and across industries regarding foreign direct investment (FDI). We propose that firms making vertical or resource-seeking investments abroad will be less likely to file AD petitions, and firms are likely to undertake vertical FDI in the context of currency undervaluation. Hence, we argue, the increasing vertical FDI of US firms makes trade disputes far less likely. We use firm-level data to examine the universe of US manufacturing firms and find that AD filers generally conduct no intrafirm trade with filed-against countries. We also find that persistent currency undervaluation is associated over time with increased vertical FDI and intrafirm trade by US multinational corporations (MNCs) in the undervaluing country. Among larger US MNCs, the likelihood of an AD filing is negatively associated with increases in intrafirm trade. In the context of currency undervaluation, we confirm the existing finding that undervaluation is associated with more AD filings. We also find, however, that high levels of intrafirm imports from countries with undervalued currencies significantly decrease the likelihood of AD filings. Our study highlights the centrality of firm heterogeneity in international trade and investment in understanding political mobilization over international economic policy.

Type
Research Article
Information
International Organization , Volume 69 , Issue 4 , Fall 2015 , pp. 913 - 947
Copyright
Copyright © The IO Foundation 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Autor, David H., Dorn, David, and Hanson, Gordon H.. 2013. The China Syndrome: Local Labor Market Effects of Import Competition in the United States. American Economic Review 103 (6):2121–68.CrossRefGoogle Scholar
Baron, Reuben M., and Kenny, David A.. 1986. The Moderator-Mediator Variable Distinction in Social Psychological Research: Conceptual, Strategic and Statistical Considerations. Journal of Personality and Social Psychology 51 (6):1173–82.CrossRefGoogle ScholarPubMed
Bechtel, Michael M., and Leuffen, Dirk. 2010. Forecasting European Union Politics: Real-time Forecasts in Political Time Series Analysis. European Union Politics 11 (2):309–27.Google Scholar
Bechtel, Michael M., and Sattler, Thomas. 2015. What Is Litigation in the World Trade Organization Worth? International Organization 69 (2):375–403.Google Scholar
Berg, Andrew, and Miao, Yanling. 2010. The Real Exchange Rate and Growth Revisited: The Washington Consensus Strikes Back? Working Paper 10/58. Washington, DC: International Monetary Fund.Google Scholar
Bernard, Andrew B., and Jensen, J. Bradford. 1995. Exporters, Jobs, and Wages in US Manufacturing: 1976–87. Brookings Papers on Economic Activity: Microeconomics: 67–119.Google Scholar
Bernard, Andrew B., and Jensen, J. Bradford. 1999. Exceptional Exporter Performance: Cause, Effect, or Both? Journal of International Economics 47 (1):1–25.Google Scholar
Bernard, Andrew B., Eaton, Jonathan, Jensen, J. Bradford, and Kortum, Samuel. 2003. Plants and Productivity in International Trade. American Economic Review 93 (4):1268–90.Google Scholar
Bernard, Andrew B., Jensen, J. Bradford, Redding, Stephen, and Schott, Peter. 2007. Firms in International Trade. Journal of Economic Perspectives 21 (3):105–30.Google Scholar
Bernard, Andrew B., Jensen, J. Bradford, Redding, Stephen, and Schott, Peter. 2009. The Margins of US Trade. American Economic Review 99 (2):487–93.CrossRefGoogle Scholar
Bernard, Andrew B., Jensen, J. Bradford, and Schott, Peter. 2009. Importers, Exporters and Multinationals: A Portrait of Firms in the US that Trade Goods. In Producer Dynamics: New Evidence from Micro Data, edited by Dunne, Timothy, Jensen, J. Bradford, and Roberts, Mark J., 513–57. Chicago: University of Chicago Press.Google Scholar
Blonigen, Bruce A. 1997. Firm-Specific Assets and the Link Between Exchange Rates and Foreign Direct Investment. American Economic Review 87 (3):447–65.Google Scholar
Bombardini, Matilde. 2008. Firm Heterogeneity and Lobby Participation. Journal of International Economics 75 (2):329–48.CrossRefGoogle Scholar
Bown, Chad P. 2011. Taking Stock of Antidumping, Safeguards and Countervailing Duties, 1990–2009. World Economy 34 (12):1955–98.Google Scholar
Bown, Chad P. 2012. Global Antidumping Database. Available at <http://econ.worldbank.org/ttbd/gad/>. Accessed 23 October 2012..+Accessed+23+October+2012.>Google Scholar
Broz, Lawrence, and Werfel, Seth H.. 2014. Exchange Rates and Industry Demands for Trade Protection. International Organization 68 (2):393–416.CrossRefGoogle Scholar
Busch, Marc L. 2000. Democracy, Consultation, and the Paneling of Disputes Under GATT. Journal of Conflict Resolution 44 (4):425–46.Google Scholar
Cameron, A. Colin, and Trivedi, Pravin K.. 2010. Microeconometrics Using Stata, rev. ed. College Station, TX: Stata Press.Google Scholar
Chiquiar, Daniel, Ramos-Francia, Manuel, Amoroso, Nicolas, and Quella, Nuria. 2008. Determinants of Mexico's Comparative Advantages and of the Performance of Its Manufacturing Exports During 1996–2005. Working Paper 2008-01. Mexico City: Banco de México.CrossRefGoogle Scholar
Copelovitch, Mark S., and Pevehouse, Jon C.. 2011. Currency Wars by Other Means? Exchange Rates and WTO Dispute Initiation. Paper presented at the 2010 IPES Conference, November, Cambridge, MA.Google Scholar
Copelovitch, Mark S., and Pevehouse, Jon C.. 2013. Ties That Bind? Preferential Trade Agreements and Exchange Rate Policy Choices. International Studies Quarterly 57 (2):385–99.Google Scholar
Easterly, William. 2005. National Policies and Economic Growth: A Reappraisal. In Handbook of Economic Growth, edited by Aghion, Philippe and Durlauf, Steven. Cambridge, MA: Harvard University Press.Google Scholar
Froot, Kenneth A., and Stein, Jeremy C.. 1991. Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach. Quarterly Journal of Economics 106 (4):1191–217.Google Scholar
Gawande, Kishore, Hoekman, Bernard, and Cui, Yue. 2015. Global Supply Chains and Trade Policy Responses to the 2008 Crisis. World Bank Economic Review 29 (1):102–28.Google Scholar
Gravelle, Jane G. 2013. Tax Havens: International Tax Avoidance and Evasion. Report R40623. Washington, DC: Congressional Research Service.Google Scholar
Greir, Kevin B., Munger, Michael C., and Roberts, Brian E.. 1994. The Determinants of Industry Political Activity, 1978–86. American Political Science Review 88 (4):911–26.Google Scholar
Helpman, Elhanan. 1984. A Simple Theory of International Trade with Multinational Corporations. Journal of Political Economy 92 (3):451–71.Google Scholar
Helpman, Elhanan. 2014. Foreign Trade and Investment: Firm-Level Perspectives. Economica 81 (321):1–14.Google Scholar
Heston, Alan, Summers, Robert, and Aten, Bettina. 2012. Penn World Table Version 7.1. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania. Available at <http://pwt.econ.upenn.edu/>. Accessed 18 June 2012..+Accessed+18+June+2012.>Google Scholar
Hilbe, Joseph M. 2011. Negative Binomial Regression. New York: Cambridge University Press.Google Scholar
Hiscox, Michael J. 2001. Class Versus Industry Cleavages: Inter-industry Factor Mobility and the Politics of Trade. International Organization 55 (1):1–46.Google Scholar
International Monetary Fund. 2012. External Balance Assessment (EBA): Technical Background of the Pilot Methodology. Available at <http://www.imf.org/external/np/res/eba/pdf/080312.pdf>. Accessed 23 October 2012..+Accessed+23+October+2012.>Google Scholar
Irwin, Douglas. 2005. The Rise of US Anti-dumping Activity in Historical Perspective. World Economy 28 (5):651–68.Google Scholar
Jarmin, R.S., and Miranda, J.. 2002. The Longitudinal Business Database, Working Paper 02–17. Washington, DC: US Census Bureau Center for Economic Studies. Available at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2128793.Google Scholar
Jensen, Nathan M. 2013. Domestic Institutions and the Taxing of Multinational Corporations. International Studies Quarterly 57 (3):440–48.Google Scholar
Kee, Hiau Looi, Neagu, Cristina, and Nicita, Alessandro. 2013. Is Protectionism on the Rise? Assessing National Trade Policies During the Crisis of 2008. Review of Economics and Statistics 95 (1):342–46.Google Scholar
Knetter, Michael, and Prusa, Thomas J.. 2003. Macroeconomic Factors and Anti-dumping Filings. Journal of International Economics 61 (1):1–18.Google Scholar
Kogut, Bruce, and Kulatilaka, Nalin. 1994. Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network. Management Science 40 (1):123–39.CrossRefGoogle Scholar
Lane, Philip R., and Milesi-Ferretti, Gian Maria. 2007. The External Wealth of Nations, Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities. 1970–2004. Journal of International Economics 73 (2):223–50.Google Scholar
Ludema, Rodney D., and Mayda, Anna Maria. 2011. Canada: No Place Like Home for Antidumping. In The Great Recession and Import Protection: The Role of Temporary Trade Barriers, edited by Bown, Chad P., 131–61. London: CEPR and the World Bank.Google Scholar
Magee, Stephen P. 1980. Three Simple Tests of the Stolper-Samuelson Theorem. In Issues in International Economics, edited by Oppenheimer, Peter, 136–53. London: Oriel Press.Google Scholar
Melitz, Marc J. 2003. The Impact of Trade on Intra-industry Reallocations and Aggregate Industry Productivity. Econometrica 71 (6):1695–725.Google Scholar
Messerlin, Patrick A. 2004. China in the World Trade Organization: Antidumping and Safeguards. World Bank Economic Review 18 (1):105–30.Google Scholar
Milner, Helen. 1988. Trading Places: Industries for Free Trade. World Politics 40 (3):350–76.Google Scholar
Nollen, Stanley D., and Quinn, Dennis P.. 1994. Free Trade, Fair Trade, Strategic Trade, and Protectionism in the US Congress, 1987–1988. International Organization 48 (3):491–525.Google Scholar
Oatley, Thomas. 2010. Real Exchange Rates and Trade Protectionism. Business and Politics 12 (2):1–17.Google Scholar
Prusa, Thomas J., and Vermulst, Edwin. 2013. United States—Definitive Antidumping and Countervailing Duties on Certain Products from China: Passing the Buck on Pass-through. World Trade Review 12 (2):197–234.Google Scholar
Quinn, Dennis P., and Toyoda, A. Maria. 2008. Does Capital Account Liberalization Lead to Growth? Review of Financial Studies 21 (3):1403–49.Google Scholar
Quinn, Dennis P., Schindler, Martin, and Toyoda, A. Maria. 2011. Assessing Measures of Financial Openness and Integration. IMF Economic Review 59 (3):488–522.Google Scholar
Ramondo, Natalia, Rappoport, Veronica, and Ruhl, Kim J.. 2013. Horizontal Versus Vertical Foreign Direct Investment: Evidence from US Multinationals. Working Paper. London: London School of Economics.Google Scholar
Rodrik, Dani. 2008. The Real Exchange Rate and Economic Growth. Brookings Papers on Economic Activity 2008 (2):365–412.Google Scholar
Rosendorff, B. Peter. 2005. Stability and Rigidity: Politics and Design of the WTO's Dispute Settlement Procedure. American Political Science Review 99 (3):389–400.CrossRefGoogle Scholar
Rumbaugh, Thomas, and Blancher, Nicolas. 2004. China: International Trade and WTO. Accession. Working Paper 04/36. Washington, DC: International Monetary Organization.Google Scholar
Sanford, Jonathan E. 2011. Currency Manipulation: The IMF and the WTO. Working Paper 22658. Washington, DC: Congressional Research Service.Google Scholar
Sattler, Thomas, and Bernauer, Thomas. 2011. Gravitation or Discrimination? Determinants of Litigation in the World Trade Organization. European Journal of Political Research 50 (2):143–67.Google Scholar
Tatelman, Todd B. 2007. United States’ Trade Remedy Laws and Non-Market Economies: A Legal Overview. Working Paper RL33976. Washington, DC: Congressional Research Service.Google Scholar
Tomiura, Eiichi. 2007. Foreign Outsourcing, Exporting, and FDI: A Productivity Comparison at the Firm Level. Journal of International Economics 72 (1):113–27.Google Scholar
US Census Bureau. NAICS Related Party Trade Database. Washington, DC. Available at <http://sasweb.ssd.census.gov/relatedparty/>. Accessed 19 October 2012..+Accessed+19+October+2012.>Google Scholar
US International Trade Administration. 2012. How to File a Petition: Industry Support. Washington, DC. Available at <http://enforcement.trade.gov/petitioncounseling/pcp-industry-support.html>. Accessed 27 January 2015..+Accessed+27+January+2015.>Google Scholar
Villarreal, M. Angeles. 2009. Mexico's Free Trade Agreements. Working Paper 652. Washington, DC: Congressional Research Service.Google Scholar
Weder, Rolf, and Wyss, Simone. 2013. Do Vertical Linkages Limit Protectionism? Switzerland in the Multifibre Arrangement. World Economy 36 (10):1261–77.Google Scholar
Weymouth, Stephen. 2012. Firm Lobbying and Influence in Developing Countries: A Multilevel Approach. Business and Politics 14 (4):1–26.Google Scholar
World Bank. 1993. The East Asian Miracle. Washington, DC: Policy Research Department.Google Scholar
Yeaple, Stephen Ross. 2009. Firm Heterogeneity and the Structure of US Multinational Activity. Journal of International Economics 78 (2):206–15.CrossRefGoogle Scholar
Supplementary material: File

Jensen supplementary material

Jensen supplementary material 1

Download Jensen supplementary material(File)
File 42.7 KB
Supplementary material: File

Jensen supplementary material

Figures A1-A2

Download Jensen supplementary material(File)
File 445 KB