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Global Supply Chains, Currency Undervaluation, and Firm Protectionist Demands

  • J. Bradford Jensen
  • Dennis P. Quinn
  • Stephen Weymouth

We examine firm participation in global supply chains to help explain a puzzling decline in protectionist demands in the U.S. despite increased import competition and ongoing currency undervaluation. To explain firm responses to undervaluation, we rely on advances in the international trade literature that uncover intraindustry heterogeneity in firm trade and investment activities. We propose that firm foreign direct investments in, and subsequent related party trade with, countries with undervalued exchange rates will lead to fewer antidumping filings. Examining the universe of U.S. manufacturing firms, we find that antidumping petition filers are more internationally engaged than non-filing peers, but conduct less related party trade with filed-against countries. High levels of related-party imports (arm's length imports) from countries with undervalued currencies significantly decrease (increase) the likelihood of U.S. antidumping petitions. Our study highlights the centrality of global supply chains in understanding political mobilization over international economic policy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19239.

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Date of creation: Jul 2013
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Handle: RePEc:nbr:nberwo:19239
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