Date of Award

6-2012

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Bradley Lewis

Language

English

Keywords

developed economy, trade, protectionism, industry

Abstract

Since China’s emergence as a developed economy, its unconventional monetary policies have drawn criticism from foreign trading partners. Despite pressure from Western governments, the People’s Republic continues to maintain a policy of “pegging” the value of the Yuan to the U.S. Dollar. A natural consequence of this has been an outcry for increased trade protectionism in the United States. Contrary to economic intuition, however, not all industries in the United States voice grievance against the Chinese, and some have even opposed protectionist legislation. The economic or other reasons for this private sector divergence of opinion have remained largely unclear. Equally unclear is whether U.S. protectionist legislation is implemented proactively or reactively. I explore various connections to determine what drives U.S. protectionist policies and speculate as to what factors most heavily influence opinions. I hypothesize that the primary determinants are an industry’s exchange rate “pass-through” and its specific exchange rate relative to the real effective exchange rate (REER) of the Yuan. To test the factors identified, I analyze lobbying data for The Currency Reform for Fair Trade Act (2010), which provides a mechanism for entities to call for trade protectionist measures. I find that the REER of the Yuan is the primary factor driving industry opinions on protectionism. I also find that unanimity in opinion for protectionism is most visible at the level of “manufacturing,” while unanimity in opinion against protectionism is most apparent at the level of “non-manufacturing.” Lastly, I find that Congressional responsiveness via protectionist legislation is predominantly reactive.

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