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The political economy of international trade

Published online by Cambridge University Press:  22 May 2009

Benjamin J. Cohen
Affiliation:
Professor of International Economic Affairs at the Fletcher School of Law and Diplomacy, Tufts University, Medford, Massachusetts.
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Review essays
Copyright
Copyright © The IO Foundation 1990

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References

This article has benefited from the comments and suggestions of Joanne Gowa, Stephen Krasner, J. David Richardson, and two anonymous referees. All the usual disclaimers, of course, apply.

1. By focusing this review on just these five books, I of course do not mean to imply that this sample is adequate to capture the full richness and diversity of recent political science writings on the politics of trade. No limited sample could possibly do that. But it can be reasonably claimed that these five selections all fall sufficiently within the mainstream of the current literature to provide a useful basis for a critical evaluation of some of the main themes and questions currently being addressed by scholars working in the field.

2. See Strange, Susan, Sterling and British Policy: A Political Study of an Internationa Currency in Decline (London: Oxford University Press, 1971), p. 3Google Scholar. See also her classic article, International Economics and International Relations: A Case of Mutual Neglect,” International Affairs 46 (04 1970), pp. 304–15CrossRefGoogle Scholar.

3. Spero, Joan Edelman, The Politics of International Economic Relations, 3d ed. (New York: St. Martin's Press, 1985)Google Scholar.

4. Keohane, Robert O. and Nye, Joseph S., “World Politics and the International Economi System,” in Bergsten, C. Fred et al. , eds., The Future of the International Economic Order: An Agenda for Research (Lexington, Mass.: D. C. Heath, 1973), p. 115Google Scholar.

5. See Cooper, Richard N., The Economics of Interdependence: Economic Policy in the Atlantic Community (New York: McGraw-Hill, 1968)Google Scholar; Kindleberger, Charles P., Power and Money: The Politics of International Economics and the Economics of International Politics (New York: Basic Books, 1970)CrossRefGoogle Scholar; and Hirschman, Albert O., National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1945)Google Scholar.

6. See Keohane, Robert O. and Nye, Joseph S., eds., Transnational Relations and World Politics (Cambridge, Mass.: Harvard University Press, 1972)CrossRefGoogle Scholar; Keohane, Robert O. and Nye, Joseph S., Power and Interdependence: World Politics in Transition (Boston: Little, Brown, 1977)Google Scholar; Gilpin, Robert, “Three Models of the Future,” in Bergsten, C. Fred and Krause, Lawrence B., eds., World Politics and International Economics (Washington, D.C.: Brookings Institution, 1975), pp. 3760Google Scholar; Gilpin, Robert, U.S. Power and the Multinational Corporation: The PoliticalEconomy of Foreign Direct Investment (New York: Basic Books, 1975)CrossRefGoogle Scholar; Krasner, Stephen D., ”State Power and the Structure of International Trade11,” World Politics 28 (04 1976), pp. 317–47CrossRefGoogle Scholar; Krasner, Stephen D., Defending the National Interest: Raw Materials Investments and U.S. Foreign Policy (Princeton, N.J.: Princeton University Press, 1978)Google Scholar; and Katzenstein, Peter J., ed., Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States (Madison: University of Wisconsin Press, 1978)Google Scholar.

7. See, for example, Pincus, J. J., “Pressure Groups and the Pattern of Tariffs,” Journal of Political Economy 83 (08 1975), pp. 757–78CrossRefGoogle Scholar; Caves, Richard E., “Economic Models of Political Choice: Canada's Tariff Structure,” Canadian Journal of Economics 9 (05 1976), pp. 278300CrossRefGoogle Scholar; Baldwin, Robert E., The Political Economy of U.S. Postwar Trade Policy (New York: New York University Graduate School of Business Administration, 1976)Google Scholar; Ray, E. J., ”Tariff and Nontariff Barriers in the United States and Abroad,” Review of Economics and Statistics 63 (05 1981), pp. 161–68CrossRefGoogle Scholar; Lavergne, R. P., The Political Economy of U.S. Tariffs: An Empirical Analysis (New York: Academic Press, 1983)Google Scholar; and Baldwin, Robert E., The Political Economy of U.S. Import Policy (Cambridge, Mass.: MIT Press, 1985)Google Scholar. For a comprehensive, albeit brief, survey of this literature, see Baldwin, Robert E., “Trade Policies in Developed Countries,” in Jones, Ronald W., ed., International Trade: Surveys of Theory and Policy (Amsterdam: North-Holland, 1986), pp. 184–94Google Scholar.

8. For an early survey of this literature, see Grossman, Gene M. and Richardson, J. David, Strategic Trade Policy: A Survey of Issues and Early Analysis (Princeton, N.J.: International Finance Section, 1985)Google Scholar. For useful synopses, see the following works of Helpman, Elhanan and Krugman, Paul R.: Market Structure and Foreign Trade (Cambridge, Mass.: MIT Press, 1985)Google Scholar, and Trade Policy and Market Structure (Cambridge, Mass.: MIT Press, 1989)Google Scholar. For instructive collections of essays, see Krugman, Paul R., ed., Strategic Trade Policy and the New International Economics (Cambridge, Mass.: MIT Press, 1986)Google Scholar; and Stern, Robert M., ed., U.S. Trade Policies in a Changing World Economy (Cambridge, Mass.: MIT Press, 1987)Google Scholar.

9. See Richardson, J. David, “The Political Economy of Strategic Trade Policy,” International Organization 44 (Winter 1990), pp. 107–35CrossRefGoogle Scholar. For an alternative perspective, see Stegemann, Klaus, ”Policy Rivalry Among Industrial States: What Can We Learn from Models of Strategic Trade Policy?International Organization 43 (Winter 1989), pp. 73100CrossRefGoogle Scholar.

10. Rosecrance, , The Rise of the Trading State, p. 16Google Scholar.

11. Ibid.

12. Ibid., p. 13.

13. Gilpin, , The Political Economy of International Relations, p. 5Google Scholar.

14. Ibid., p. 228.

15. Ibid., p. 408.

16. Conybeare, , Trade Wars, p. ixGoogle Scholar.

17. Ibid., p. 265.

18. Lake, , Power, Protection, and Free Trade, p. 2Google Scholar.

19. Ibid., p. 3.

20. Milner, , Resisting Protectionism, p. 292Google Scholar; emphasis added.

21. Waltz, Kenneth N., Man, the State and War (New York: Columbia University Press, 1959)Google Scholar.

22. Waltz, Kenneth N., Theory of World Politics (Reading, Mass.: Addison-Wesley, 1979), p. 63Google Scholar.

23. For more on the cognitive approach, see Rorhlich, Paul Egon, “Economic Culture and Foreign Policy: The Cognitive Analysis of Economic Policy Making,” International Organization 41 (Winter 1987), pp. 6192CrossRefGoogle Scholar.

24. Gourevitch, Peter A., “The Second Image Reversed,” International Organization 32 (Autumn 1978), pp. 881912CrossRefGoogle Scholar.

25. The relative merits of the two modes of analysis are, of course, a hotly debated topic among political scientists. See, for example, the contrasting comments of Katzenstein, in Between Power and Plenty, pp. 1215Google Scholar, and Keohane, Robert O. in After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, N.J.: Princeton University Press 1984), pp. 25–26Google Scholar.

26. See, for example, Conybeare, John A. C., “Tariff Protection in Developed and Developing Countries: A Cross-Sectional and Longitudinal Analysis,” International Organization 37 (Summer 1983), pp. 441–67CrossRefGoogle Scholar.

27. One exception is Baldwin's The Political Economy of U.S. Postwar Trade Policy, which makes use of multivariate probit analysis.

28. See, for example, Heller, H. Robert, “Choosing an Exchange Rate System,” Finance and Development 14 (06 1977), pp. 2326Google Scholar; Heller, H. Robert, “Determinants of Exchange Rate Practices,” Journal of Money, Credit and Banking 10 (08 1978), pp. 308–21CrossRefGoogle Scholar; Dreyer, Jacob, “Determinants of Exchange Rate Regimes for Currencies of Developing Countries: Some Preliminary Results,” World Development 6 (04 1978), pp. 437–45CrossRefGoogle Scholar; and Weil, Gordon, Exchange-Rate Regime Selection in Theory and Practice (New York: New York University Graduate School of Business Administration, 1983)Google Scholar.

29. The key word here is “instinctively.” It is not that economists are unaware of the potential for extending their traditional apparatus of utility analysis to incorporate other possible interests or goals; it is just that, typically, they are not inclined to do so. One frequently cited excuse is the difficulty of formally quantifying any values other than real income.

30. There are exceptions, of course. For an early (and unfortunately neglected) example, see Johnson, Harry G., “An Economic Theory of Protectionism, Tariff Bargaining, and the Formation of Customs Unions,” Journal of Political Economy 73 (06 1965), pp. 256–83CrossRefGoogle Scholar.

31. Lake, , Power, Protection, and Free Trade, pp. 2021Google Scholar.

32. Johnson, , “An Economic Theory of Protectionism,” p. 257Google Scholar.

33. Gilpin, , U.S. Power and the Multinational Corporation, p. 43Google Scholar.

34. Rosecrance, , The Rise of the Trading State, pp. 8, 17, and 30Google Scholar.

35. Ibid., pp. 17, 30, and 62.

36. See Gilpin, , The Political Economy of International Relations, p. 32Google Scholar; and Lake, , Power, Protection, and Free Trade, p. 22Google Scholar. The locus classicus on this subject is Viner's, JacobPower Versus Plenty as Objectives of Foreign Policy in the Seventeenth and Eighteenth Centuries,” World Politics 1 (10 1948), pp. 129CrossRefGoogle Scholar.

37. A major exception is the economist Charles Kindleberger. See, for example, his Government and International Trade (Princeton, N.J.: International Finance Section, 1978)Google Scholar.

38. Axelrod, Robert and Keohane, Robert O., “Achieving Cooperation Under Anarchy: Strategies and Institutions,” in Oye, Kenneth A., ed., Cooperation Under Anarchy (Princeton, N.J.: Princeton University Press, 1986), p. 252Google Scholar.

39. Snidal, Duncan, “The Game Theory of lnternational Politics,” in Oye, , Cooperation Under Anarchy, pp. 2557Google Scholar.

40. Oye, Kenneth A., “Explaining Cooperation Under Anarchy: Hypotheses and Strategies,” in Oye, , Cooperation Under Anarchy, pp. 124Google Scholar.

41. Milner, , Resisting Protectionism, p. 299Google Scholar.

42. The same criticism, of course, can also be made of standard theoretical models of economic behavior developed in the neoclassical tradition, which also by convention simply take preferences as given. Economists have no claim to superiority on this issue.

43. See Conybeare, , Trade Wars, pp. 2228Google Scholar. The optimum tariff argument was already fully developed by economic theorists more than three decades ago, with intellectual roots going as far back as the early nineteenth century. For some recent discussion, see Corden, W. M., “The Normative Theory of International Trade,” in Jones, , International Trade, pp. 8286Google Scholar.

44. Lake, , Power, Protection, and Free Trade, p. 38Google Scholar.

45. This is certainly true of the literature on strategic trade policy. It is also characteristic of most of the recent writing by economists on issues relating to international macroeconomic interdependence and policy coordination. For useful surveys of the latter, see Cooper, Richard N., “Economic Interdependence and Coordination of Economic Policies,” in Jones, Ronald W. and Kenen, Peter B., eds., Handbook of International Economics, vol. 2 (Amsterdam: North-Holland, 1985), pp. 1195–234Google Scholar; and Horne, Jocelyn and Masson, Paul R., “Scope and Limits of International Economic Cooperation and Policy Coordination,” International Monetary Fund Staff Papers 35 (06 1988), pp. 259–96CrossRefGoogle Scholar.

46. Krasner, Stephen D., “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” in Krasner, Stephen D., ed., International Regimes (Ithaca, N.Y.: Cornell University Press, 1983), p. 2Google Scholar.

47. Keohane, After Hegemony.

48. See Kindleberger, Charles P., The World in Depression, 1929–1939 (Berkeley: University of California Press, 1973)Google Scholar; Gilpin, U.S. Power and the Multinational Corporation; and Krasner, ”State Power and the Structure of International Trade.” The conventional appellation for the theory is attributed to Keohane, Robert O., “The Theory of Hegemonic Stability and Changes in International Economic Regimes,” in Holsti, Ole R., Siverson, Randolph M., and George, Alexander L., eds., Change in the International System (Boulder, Colo.: Westview Press, 1980), pp. 131–62Google Scholar.

49. Kindleberger, , The World in Depression, p. 305Google Scholar.

50. See, for example, Keohane, , After Hegemony, pp. 3146Google Scholar; and Snidal, Duncan, “ The Limits of Hegemonic Stability Theory,” International Organization 39 (Autumn 1985), pp. 579614CrossRefGoogle Scholar.

51. Lake, , Power, Protection, and Free Trade, p. 36Google Scholar.

52. Conybeare, , Trade Wars, p. xiGoogle Scholar.

53. Milner, , Resisting Protectionism, pp. 412Google Scholar.

54. See, for example, Gilpin, Robert, War and Change in World Politics (New York: Cambridge University Press, 1981), p. 145CrossRefGoogle Scholar.

55. Gilpin, , The Political Economy of International Relations, p. 72Google Scholar.

56. Ibid., p. 78.

57. Ibid.

58. Rosecrance, , The Rise of the Trading State, p. 165Google Scholar.

59. Milner, , Resisting Protectionism, p. 298Google Scholar.

60. Lake, , Power, Protection, and Free Trade, p. 229Google Scholar.

61. Conybeare, , Trade Wars, pp. 278–81Google Scholar.

62. The analytic relevance of the German experience was, of course, well demonstrated by Hirschman in his classic work, National Power and the Structure of Foreign Trade.