The uneven impact of exchange rate movements on trade disputes

Abstract

Trade politics and exchange rate politics are inextricably linked. Internationally active firms often press governments for protection when exchange rates fluctuate. However, increasing rates of industry concentration have modified the theoretic linkages between exchange rate movement and trade lobbying. I emphasize firm size and resulting industry concentration ratios as important predictors of exchange rate preferences and resulting demands for protection. Large firms now have more financial and operational hedging mechanisms at their disposal, which better enable them to absorb currency fluctuations. Smaller firms are still affected through a variety of channels. I demonstrate that industry concentration negatively impacts antidumping filings, using a series of negative binomial count models for antidumping filings in US manufacturing sectors, organized by three-digit North American Industry Classification System (NAICS) code, from 1978 to 2015. Results support industry concentration as an important predictor of exchange rate-affected trade lobbying in an era of financial and operational hedging.