China, Currency Misalignments, and Industry Demands for Trade Protection in the United States

46 Pages Posted: 4 Sep 2014 Last revised: 20 Feb 2016

See all articles by J. Lawrence Broz

J. Lawrence Broz

University of California, San Diego (UCSD) - Department of Political Science

Multiple version iconThere are 2 versions of this paper

Date Written: February 19, 2016

Abstract

It is well known that currency misalignments lead governments to raise trade barriers. Less well known is that the protectionist response to currency misalignments varies by industry. I argue that industries with high exchange rate pass-through (where exchange-rate changes are more fully transmitted to product prices) are more likely to seek trade protection during misalignments than industries with low pass-through. I also argue that industries with global supply chains are less likely to seek trade protection during misalignments than industries that source inputs domestically. I evaluate these arguments with evidence from a 2010 congressional proposal to impose trade barriers on nations like China that are perceived to engage in currency manipulation. I find support for the claim that exchange rates have differential affects across industries: high pass-through industries explicitly supported this proposal while industries dependent on global supply chains took positions against it. I also show that the location of supporting and opposing industries across congressional districts correlates with two types of congressional behaviors: cosponsoring and roll-call voting on the 2010 currency proposal. Exchange rates appear to induce pressures for targeted trade barriers only in industries where competitiveness is unambiguously harmed by misalignments.

Keywords: Currency manipulation, undervaulation, China, exchange rates

JEL Classification: F3, F31, F33, F36

Suggested Citation

Broz, J. Lawrence, China, Currency Misalignments, and Industry Demands for Trade Protection in the United States (February 19, 2016). The first draft was presented at the American Political Science Association 2014 Annual Meeting. Available at SSRN: https://ssrn.com/abstract=2490648 or http://dx.doi.org/10.2139/ssrn.2490648

J. Lawrence Broz (Contact Author)

University of California, San Diego (UCSD) - Department of Political Science ( email )

9500 Gilman Drive
Code 0521
La Jolla, CA 92093-0521
United States

HOME PAGE: http://pages.ucsd.edu/~jlbroz/

Register to save articles to
your library

Register

Paper statistics

Downloads
95
Abstract Views
544
rank
251,569
PlumX Metrics