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State Power and the Structure of International Trade

Published online by Cambridge University Press:  18 July 2011

Stephen D. Krasner
University of California


The structure of international trade, identified by the degree of openness for the movement of goods, can best be explained by a state-power theory of international political economy. This theory begins with the assumption that the nature of international economic movements is determined by states acting to maximize national goals. Four goals—aggregate national income, political power, social stability, and economic growth—can be systematically related to the degree of openness in the international trading system for states of different relative sizes and levels of development. This analysis leads to the conclusion that openness is most likely to exist when there is a hegemonic distribution of potential economic power. Time-series data on tariff levels, trade proportions, regional concentration, per capita income, national income, share of world trade, and share of world investment are then presented. The first three are used to describe the degree of openness in the trading system; the last four, the distribution of state power. The data suggest that the state-power theory should be amended to take into consideration domestic political constraints on state action.

Research Article
Copyright © Trustees of Princeton University 1976

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* I would like to thank Robert Art, Peter Gourevitch, Samuel Huntington, Robert Keohane, Rachel McCulloch, Joseph Nye, Ronald Rogowski, and Robert W. Tucker for their comments. My greatest intellectual debt, and one not adequately reflected in the footnotes, is to Robert Gilpin. Completion of this paper was made possible by support from the Washington Center of Foreign Policy Research of the Johns Hopkins School of Advanced International Studies and the Center for International Affairs at Harvard University.

1 Johnson, , “Optimum Tariffs and Retaliation,” in Johnson, Harry, International Trade and Economic Growth (Cambridge: Harvard University Press 1967), 3161Google Scholar.

2 See, for instance, Hagen, Everett, “An Economic Justification of Protectionism,” Quarterly Journal of Economics, Vol. 72 (11 1958), 496514CrossRefGoogle Scholar; Johnson, Harry, “Optimal Trade Intervention in the Presence of Domestic Distortions,” in Baldwin, Robert and others, Trade, Growth and the Balance of Payments: Essays in Honor of Gottfried Haberler (Chicago: Rand McNally 1965), 334Google Scholar; and Bhagwati, Jagdish, Trade, Tariffs, and Growth (Cambridge: MIT Press 1969), 295308Google Scholar.

3 This notion is reflected in Hirschman, Albert O., National Power and the Structure of Foreign Trade (Berkeley: University of California Press 1945)Google Scholar; Tucker, Robert W., The New Isolationism: Threat or Promise? (Washington: Potomac Associates 1972)Google Scholar; and Waltz, Kenneth, “The Myth of Interdependence,” in Kindleberger, Charles P., ed., The International Corporation (Cambridge: MIT Press 1970), 205–23Google Scholar.

4 Hirschman (fn.3), 13–34.

5 Kuznets, Simon, Modern Economic Growth: Rate, Structure, and Spread (New Haven: Yale University Press 1966), 302Google Scholar.

6 See Calleo, David P. and Rowl, Benjamin and, America and the World Political Economy (Bloomington: Indiana University Press 1973)Google Scholar, Part II, for a discussion of American thought; Heckscher, Eli, Mercantilism (New York: Macmillan 1955)Google Scholar; and Coleman, D. C., ed., Revisions in Mercantilism (London: Methuen 1969)Google Scholar, for the classic discussion and a collection of recent articles on mercantilism; Frank, Andre Gunder, Latin America: Underdevelopment or Revolution (New York: Monthly Review 1969)Google Scholar; Emmanuel, Arghiri, Unequal Exchange: A Study of the Imperialism of Trade (New York: Monthly Review 1972)Google Scholar; and Galtung, Johan, “A Structural Theory of Imperialism,” Journal of Peace Research, VIII, No. 2 (1971), 81117CrossRefGoogle Scholar, for some representative arguments about the deleterious effects of free trade.

7 See Haberler, Gottfried, International Trade and Economic Development (Cairo: National Bank of Egypt 1959)Google Scholar; and Diaz-Alejandro, Carlos F., “Latin America: Toward 2000 A.D.,” in Bhagwati, Jagdish, ed., Economics and World Order from the 1970s to the iggos (New York: Macmillan 1972), 223–55Google Scholar, ff some arguments concerning the benefits of trade.

8 See Johnson, Harry, Economic Policies Toward Less Developed Countries (New York: Praeger 1967), 9094Google Scholar, for a discussion of nominal versus effective tariffs; Belassa, Bela, Trade Liberalization among Industrial Countries (New York: McGraw-Hill 1967), chap. 3Google Scholar, for the problems of determining the height of tariffs; and Schmitt, Hans O., “International Monetary System: Three Options for Reform,” International Affairs, L (04 1974), 200Google Scholar, for similar effects of tariffs and undervalued exchange rates.

9 Kindleberger, Charles P., “The Rise of Free Trade in Western Europe 1820–1875,” The Journal of Economic History, xxxv (03 1975), 2055CrossRefGoogle Scholar; Pollard, Sidney, European Economic Integration 1820–1875 (London: Thames and Hudson 1974), 117Google Scholar; Condliffe, J. B., The Commerce of Nations (New York: Norton 1950), 212–23, 229–30Google Scholar.

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11 Kindelberger, Charles P., The World in Depression (Berkeley: University of California Press 1973), 171Google Scholar; Condliffe (fn. 9), 478–81.

12 Condlifle (fn. 9), 498; Gilpin, Robert, “The Politics of Transnational Economic Relations,” International Organization, xxv (Summer 1971), 407Google Scholar; Kindelberger (fn. 11), 132, 171.

13 Evans, John W., The Kennedy Round in American Trade Policy (Cambridge: Harvard University Press 1971), 1020CrossRefGoogle Scholar.

14 Figures are available in United Nations, Yearbook, of National Account Statistics, various years.

15 Savage, Richard I. and Deutsch, Karl W., “A Statistical Model of the Gross Analysis of Transaction Flows,” Econometrica, XXVIII (07 1960), 551–72CrossRefGoogle Scholar. Chadwick, Richard and Deutsch, Karl W., in “International Trade and Economic Integration: Further Developments in Trade Matrix Analysis,” Comparative Political Studies, VI (04 1973), 84109CrossRefGoogle Scholar, make some amendments to earlier methods of calculation when regional groupings are being analyzed. These are not reflected in Table I. I am indebted to Professor Deutsch for giving me access to the unpublished data presented in the table.

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18 Kindleberger (fn. 9), 41.

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20 Aron, Raymond, The Imperial Republic (Englewood Cliffs, N.J.: Prentice-Hall 1973), 191Google Scholar; Gilpin (fn. 12), 409–12; Calleo and Rowland (fn. 6), chap. 3.

21 Gardner, Lloyd, Economic Aspects of New Deal Diplomacy (Madison: University of Wisconsin Press 1964), 389Google Scholar; Gilpin (fn. 12), 409.

22 Triffin (fn. 19), 22–28; Rolfe and Burtle (fn. 19), 13–55; Yeager (fn. 19), 278–317; Kindleberger (fn. n), 270–71.

23 Kindleberger (fn. 11), 199–224; Yeager (fn. 19), 314; Condliffe (fn. 9), 499.

24 Triffin (fn. 19), 22.

25 Kindleberger (fn. 11), 296.

26 Condliffe (fn. 9), 494–97.

27 Evans (fn. 13), 7.

28 Gilpin, Robert, American Power and the Multinationals: The Political Economy of Foreign Investment (New York: Basic Books 1975), chap. 3Google Scholar; Kindleberger (fn. 11), 294.

29 Yeager (fn. 19), 279.

30 Condliffe (fn. 9), 347.

31 This draws from arguments made by Lowi, Theodore, particularly his “Four Systems of Policy, Politics and Choice,” Public Administration Review, XXXII (07-08 1972), 298310CrossRefGoogle Scholar. See also Schattschneider, E. E., Politics, Pressures and the Tariff: A Study of Free Enterprise in Pressure Politics as Shown in the 7929–7930 Revision of the Tariff (New York: Prentice-Hall 1935)Google Scholar.

32 See Kelly, Janet, “American Banks in London,” Ph.D. diss. (Johns Hopkins University 1975)Google Scholar, for a study of the overseas expansion of American banks in the postwar period.

33 Schattschneider (fn. 31), 288.

34 See Katzenstein, Peter J., “Transnational Relations and Domestic Structures: Foreign Economic Policies of Advanced Industrial States,” International Organization, XXX (Winter 1976)Google Scholar, for a suggestive discussion of the impact of the relative power of state and society on foreign economic policy. See also Huntington, Samuel P., “Paradigms of American Politics: Beyond the One, the Two, and the Many,” Political Science Quarterly, Vol. 89 (03 1974), 1617CrossRefGoogle Scholar, as we as Huntington, Political Order in Changing Societies (New Haven: Yale University Press 1968), chap. 2Google Scholar.

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