The Influences of Foreign Direct Investments, Intrafirm Trading, and Currency Undervaluation on U.S. Firm Trade Disputes

Posted: 11 Oct 2018

See all articles by J. Bradford Jensen

J. Bradford Jensen

Georgetown University - McDonough School of Business; Peterson Institute for International Economics

Dennis P. Quinn

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy

Stephen Weymouth

Georgetown University

Multiple version iconThere are 3 versions of this paper

Date Written: September 20, 2015

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.

Keywords: F23, F1, F5

Suggested Citation

Jensen, J. Bradford and Quinn, Dennis P. and Weymouth, Stephen, The Influences of Foreign Direct Investments, Intrafirm Trading, and Currency Undervaluation on U.S. Firm Trade Disputes (September 20, 2015). International Organization, Vol. 69, No. 4, 2015, Georgetown McDonough School of Business Research Paper, Available at SSRN: https://ssrn.com/abstract=3252785

J. Bradford Jensen

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Dennis P. Quinn (Contact Author)

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy ( email )

Washington, DC 20057
United States

Stephen Weymouth

Georgetown University

Washington, DC 20057
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
392
PlumX Metrics