Skip to main content
×
×
Home

No Business Like FIRC Business: Foreign-Imposed Regime Change and Bilateral Trade

  • Paul Zachary, Kathleen Deloughery and Alexander B. Downes
Abstract

Scholars argue that states undertake foreign military interventions for economic reasons, yet few have investigated whether intervention produces economic benefits. This article answers this question in the context of US foreign-imposed regime changes (FIRCs) in Latin America. Because FIRCs install leaders who are sympathetic to the intervener’s interests, economic arguments maintain that these interventions should increase bilateral trade between the targets and imposing countries. Yet security-based arguments assert that FIRCs should have little economic effect, as regime changes target threats rather than generate economic benefits. A third perspective argues that FIRCs reduce trade by generating political instability, which causes foreign firms to cut back on their involvement and domestic firms to experience difficulty getting goods to market. To test these competing arguments, this study employs a novel dataset on bilateral trade (1873–2007) compiled through archival research in Washington, DC. Using a gravity model and synthetic controls, it finds that FIRC produces an average decrease of 45 per cent in the dollar value of bilateral trade. Further analysis of archival sector-level data and case studies cast doubt on alternate explanations.

Copyright
Footnotes
Hide All
*

Department of Political Science, University of California, San Diego (email: pzachary@ucsd.edu); Department of Public Policy, University at Albany, SUNY (email: kdeloughery@albany.edu); Department of Political Science, The George Washington University (email: downes@gwu.edu). Previous versions of this article were presented at the 2013 meeting of the International Studies Association and seminars at UC San Diego and George Washington University. The authors thank Lawrence Broz, Chris Fariss, Mike Findley, James Fowler, Julia Gray, Emilie Hafner-Burton, Kyle Joyce, Miles Kahler, Stephen Kaplan, David Lake, Brad LeVeck, William Reed, Molly Roberts, Phil Roeder, Rachel Stein and Caitlin Talmadge and the anonymous reviewers for helpful comments and suggestions. We also thank the librarians at the Department of Commerce for their invaluable guidance as well as Corey Hill, Michael Joseph, Julia Macdonald and Michael Weaver for excellent research assistance. Zachary acknowledges support from the National Science Foundation and the San Diego Supercomputer Center. All remaining errors are the authors’ own. Data replication sets are available at http://dataverse.harvard.edu/dataverse/BJPolS, and online appendices are available at http://dx.doi.org/doi:10.1017/S0007123415000332.

Footnotes
References
Hide All
Abadie, Alberto, Diamond, Alexis, and Hainmueller, Jens. 2010. Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program. Journal of the American Statistical Association 105 (490):493505.
Arango, Tim, and Krauss, Clifford. 2013. China is Reaping Biggest Benefits of Iraq Oil Boom. The New York Times, 2 June.
Atzili, Boaz. 2012. Good Fences, Bad Neighbors: Border Fixity and International Conflict. Chicago, IL: University of Chicago Press.
Audretsch, David B., Keilbach, Max C., and Lehmann, Erik E.. 2006. Entrepreneurship and Economic Growth. Oxford: Oxford University Press.
Beck, Nathaniel, Katz, Jonathan N., and Tucker, Richard. 1998. Taking Time Seriously: Time-Series-Cross-Section Analysis with a Binary Dependent Variable. American Journal of Political Science 42 (4):12601288.
Berger, Daniel, Easterly, William, Nunn, Nathan, and Satyanath, Shanker. 2013. Commercial Imperialism? Political Influence and Trade During the Cold War. American Economic Review 103 (2):863896.
Biglaiser, Glen, and DeRouen, Karl. 2007. Following the Flag: Troop Deployment and US Foreign Direct Investment. International Studies Quarterly 51 (4):835854.
Boix, Carles. 2008. Economic Roots of Civil Wars and Revolutions in the Contemporary World. World Politics 60 (3):390437.
Bracke, Maud. 2007. Which Socialism, Which Detente?: West European Communism and the Czechoslovak Crisis of 1968. Budapest: Central European University Press.
Bresnahan, Timothy F., and Reiss, Peter C.. 1991. Entry and Competition in Concentrated Markets. Journal of Political Economy 99 (5):9771009.
Bueno de Mesquita, Bruce, and Downs, George W.. 2006. Intervention and Democracy. International Organization 60 (3):627649.
Bureau of the Census. 1905–1946. Foreign Commerce and Navigation of the United States. Washington, DC: US Government Printing Office.
Byman, Daniel L., and Pollack, Kenneth M.. 2001. Let Us Now Praise Great Men: Bringing the Statesman Back In. International Security 25 (4):107146.
Carneiro, Anabela, Guimarães, Paulo, and Portugal, Pedro. 2012. Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity. American Economic Journal: Macroeconomics 4 (2):133152.
Chiozza, Giacomo, and Goemans, H.E.. 2011. Leaders and International Conflict. New York: Cambridge University Press.
CIA. 1970. Richard Helms Handwritten Notes, “Meeting with the President on Chile at 1525.” September 15.
CIA. 2014. CIA World Fact Book, technical report, CIA, Guatemala.
Collier, Paul, and Hoeffler, Anke. 2004. Aid, Policy and Growth in Post-Conflict Societies. European Economic Review 48 (5):11251145.
Comisión de Publicaciones. 1994. Panama en Cifras: Años 1989–1993. Panama: Dirección de Estadística y Censo.
Disdier, Anne-Célia, and Head, Keith. 2008. The Puzzling Persistence of the Distance Effect on Bilateral Trade. Review of Economics and Statistics 90 (1):3748.
Dominguez, Jorge. 2007. International Cooperation in Latin America: The Design of Rational Institutions by Slow Accretion. In Crafting Cooperation: Regional International Institutions in Comparative Perspective, edited by Amitav Acharya and Alistair Iain Johnston, 83128. New York: Cambridge University Press.
Downes, Alexander B. 2012. Decapitation by FIRC: Foreign-Imposed Regime Change and the Fate of Leaders. Paper Presented at the Annual Meeting of the International Studies Association, San Diego, CA, April.
Downes, Alexander B. 2013. Catastrophic Success: Foreign-Imposed Regime Change and Civil War. Working paper. Washington, DC: George Washington University.
Downes, Alexander B., and Monten, Jonathan. 2013. Forced to be Free: Why Foreign-Imposed Regime Change Rarely Leads to Democratization. International Security 37 (4):90131.
Downes, Alexander B., and Sechser, Todd S.. 2012. The Illusion of Democratic Credibility. International Organization 66 (3):457489.
Drezner, Daniel W. 1998. The Sanctions Paradox: Economic Statecraft and International Relations. New York: Cambridge University Press.
Dupont, William, and Plummer, Dale. 2005. Using Stata v9 to Model Complex Non-Linear Relationships with Restricted Cubic Splines. Paper presented at the Annual Meeting of the North American Stata Users’ Group, Boston, MA, July.
Durrleman, Sylvain, and Simon, Richard. 1989. Flexible Regression Models with Cubic Splines. Statistics in Medicine 8 (5):551561.
Eckstein, Harry. 1975. Case Studies and Theory in Political Science. In Handbook of Political Science, Vol. 7: Strategies of Inquiry, edited by Fred I Greenstein and Nelson W. Polsby, 94137. Reading, MA: Addison-Wesley.
Fazal, Tanisha M. 2007. State Death: The Politics and Geography of Conquest, Occupation, and Annexation. Princeton, NJ: Princeton University Press.
Federal Reserve Bank of Minneapolis. ND. Consumer Price Index (Estimate) 1800-. Available from https://www.minneapolisfed.org/community/teaching-aids/cpi-calculator-information/consumer-price-index-1800, accessed 17 June 2015.
Federico, Giovanni, and Tena, Antonio. 1991. On the Accuracy of Foreign Trade Statistics (1909-1935): Morgenstern Revisited. Explorations in Economic History 28 (3):259273.
Finn, Janet L. 1998. Tracing the Veins: Of Copper, Culture, and Community from Butte to Chuquicamata. Berkeley: University of California Press.
Gleijeses, Piero. 1992. Shattered Hope: The Guatemalan Revolution and the United States, 1944-1954. Princeton, NJ: Princeton University Press.
Gobat, Michel. 2005. Confronting the American Dream: Nicaragua Under U.S. Imperial Rule. Durham, NC: Duke University Press.
Goemans, H.E., Gleditsch, Kristian Skrede, and Chiozza, Giacomo. 2009. Archigos: A Data Set on Leaders 1875-2004. Version 2.9. Rochester, NY: University of Rochester.
Goldstein, Judith L., Rivers, Douglas, and Tomz, Michael. 2007. Institutions in International Relations: Understanding the Effects of the GATT and the WTO on World Trade. International Organization 61 (1):3767.
Gowa, Joanne, and Mansfield, Edward D.. 2004. Alliances, Imperfect Markets, and Major-Power Trade. International Organization 58 (4):775805.
Green, Donald P., Kim, Soo Yeon, and Yoon, David H.. 2001. Dirty Pool. International Organization 55 (2):441468.
Greenspan, Alan. 2008. The Age of Turbulence: Adventures in a New World. New York: Penguin.
Grow, Michael. 2008. U.S. Presidents and Latin American Interventions: Pursuing Regime Change in the Cold War. Lawrence: University Press of Kansas.
Hoeffler, Anke. 2008. Dealing with the Consequences of Violent Conflicts in Africa, background paper for the African Development Bank Report, University of Oxford. Available at http://users.ox.ac.uk/~ball0144/consequences.pdf, accessed 17 June 2015.
Hufbauer, Gary Clyde, Schott, Jeffrey J., and Elliott, Kimberly Ann. 2009. Economic Sanctions Reconsidered, 3rd Edition. Washington, DC: Peterson Institute for International Economics.
Human Rights Watch. 2012. World Report, technical report, Guatemala.
Immerman, Richard H. 1982. The CIA in Guatemala: The Foreign Policy of Intervention. Austin: University of Texas Press.
Kerevel, Yann. 2006. Re-Examining the Politics of U.S. Intervention in Early 20th Century Nicaragua: José Madriz and the Conservative Restoration. University of New Mexico: Latin American Institute.
King, Gary, Honaker, James, Joseph, Anne, and Scheve, Kenneth. 1998. Listwise Deletion is Evil: What to Do About Missing Data in Political Science. Working paper. Cambridge, MA: Harvard University.
Kinzer, Stephen. 2006. Overthrow: America’s Century of Regime Change from Hawaii to Iraq. New York: Times Books.
Kinzer, Stephen. 2013. Latin America Sees US Diverting Morales’ Plane as Yankee Imperialism. The Guardian, 5 July.
Lo, Nigel, Hashimoto, Barry, and Reiter, Dan. 2008. Ensuring Peace: Foreign-Imposed Regime Change and Post-War Peace Duration, 1914-2001. International Organization 62 (4):717736.
Lohmann, Susanne, and O’Halloran, Sharyn. 1994. Divided Government and U.S. Trade Policy: Theory and Evidence. International Organization 48 (4):595632.
Long, Andrew G., and Leeds, Brett Ashley. 2006. Trading for Security: Military Alliances and Economic Agreements. Journal of Peace Research 43 (4):433451.
Maddison, Angus. 1995. Monitoring the World Economy, 1820-1992. Paris: Development Centre of the Organisation for Economic Co-Operation and Development.
Mansfield, Edward D., Milner, Helen V., and Rosendorff, B. Peter. 2000. Free to Trade: Democracies, Autocracies, and International Trade. American Political Science Review 94 (2):305321.
Marcy, William. 2010. The Politics of Cocaine: How U. S. Foreign Policy has Created a Thriving Drug Industry in Central and South America. Chicago, IL: Chicago Review Press.
Markusen, James R., and Venables, Anthony J.. 1998. Multinational Firms and the New Trade Theory. Journal of International Economics 46 (2):183203.
Mátyás, László. 1997. Proper Econometric Specification of the Gravity Model. The World Economy 20 (3):363368.
Mearsheimer, John J., and Walt, Stephen M.. 2007. The Israel Lobby and U.S. Foreign Policy. New York: Farrar, Straus and Giroux.
National Security Council. 1970. Response to NSSM [National Security Study Memorandum] 97, 18 August.
New York Times . 1989. Fighting in Panama: The President; a Transcript of Bush’s Address on the Decision to Use Force in Panama, 20 December.
OECD StatExtracts. 2015. Foreign Direct Investment, available at http://stats.oecd.org/, accessed 17 June 2015.
Pape, Robert A. 1997. Why Economic Sanctions Do Not Work. International Security 24 (2):90136.
Peic, Goran, and Reiter, Dan. 2011. Foreign-Imposed Regime Change, State Power, and Civil War Onset, 1920-2004. British Journal of Political Science 41 (3):453475.
Pollins, Brian M. 1989. Conflict, Cooperation, and Commerce: The Effect of International Political Interactions on Bilateral Trade Flows. American Journal of Political Science 33 (3):737761.
Qureshi, Lubna Z. 2009. Nixon, Kissinger, and Allende: U.S. Involvement in the 1973 Coup in Chile. Lanham, MD: Lexington Books.
Rogowski, Ronald. 1987. Trade and the Variety of Democratic Institutions. International Organization 41 (2):203223.
RT Business. 2014. Iraq Exodus? Oil Majors Withdraw Staff as Terror Threat Rises, 19 June. Available at http://rt.com/business/167004-foreign-oil-evacuate-iraq/, accessed 4 February 2015.
Saunders, Elizabeth N. 2011. Leaders at War: How Presidents Shape Military Interventions. Ithaca, NY: Cornell University Press.
Schlesinger, Stephen, and Kinzer, Stephen. 1999. Bitter Fruit: The Story of the American Coup in Guatemala, expanded edition. Cambridge, MA: Harvard University Press.
Streeter, Stephen M. 2000. Managing the Counterrevolution: The United States and Guatemala, 1954-1961. Athens: Ohio University Center for International Studies.
The White House. 1970. Memorandum of Conversation-NSC Meeting-Chile (NSSM 97), 6 November.
Tomz, Michael. 2007. Domestic Audience Costs in International Relations: An Experimental Approach. International Organization 61 (4):821840.
Tomz, Michael, Goldstein, Judith L., and Rivers, Douglas. 2007. Do We Really Know that the WTO Increases Trade? Comment. American Economic Review 97 (5):20052018.
U.S. Census Bureau. 1891–2012. Statistical Abstract of the United States, 131st Edition, Vol. 1. Washington, DC: US Census Bureau.
Voeten, Erik, and Brewer, Paul R.. 2006. Public Opinion, the War in Iraq, and Presidential Accountability. Journal of Conflict Resolution 50 (6):809830.
Wolford, Scott. 2007. The Turnover Trap: New Leaders, Reputation, and International Conflict. American Journal of Political Science 51 (4):772788.
Yates, Lawrence A. 2012. The U.S. Military Intervention in Panama: Origins, Planning, and Crisis Management, June 1987-December 1989. Washington, DC: Government Printing Office.
Yu, Miaojie. 2010. Trade, Democracy, and the Gravity Equation. Journal of Development Economics 91 (2):289300.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

British Journal of Political Science
  • ISSN: 0007-1234
  • EISSN: 1469-2112
  • URL: /core/journals/british-journal-of-political-science
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×
Type Description Title
PDF
Supplementary materials

Zachary supplementary material
Appendix

 PDF (536 KB)
536 KB

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed