A Prism on Globalization: Corporate Responses to the Dollar
Brookings Institution Press
1999
198 pp.
0815773609
$36.95
A specialized study of the trading behavior of multinational American companies during the 1980s and early 1990s, when the dollar-exchange rate moved dramatically up and down. The economic behavior of such firms carries great importance for international trade -- sales between multinational firms account for more than one-third of U.S. exports and an even higher share of imports. But flexible exchange rates create challenges for firms whose multinational customers want a degree of price stability -- each in their own currency. In their study, Rangan and Lawrence find that U.S. firms did attempt to maintain price stability in local markets, as did foreign firms in the American market. That sometimes led to the charge of dumping, when businesses faced with a currency depreciation sold their exports abroad at prices lower than those in their home market. They also switched their trade patterns to respond to movements in exchange rates faster than firms dealing with foreign companies, but not as fast as journalistic claims about "globalization" would imply. The authors conclude that international borders continue to pose informational and psychological barriers to trade -- even when formal trade restrictions are low.
Sign-up for free weekly updates from ForeignAffairs.com.