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Economic Interdependence and Foreign Policy in the Seventies

  • Richard N. Cooper (a1)
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A Casual reading of contemporary news reports suggests that during the past decade economic issues have taken on growing importance in the relations of non-Communist developed countries. The disputes between the United States and Japan over textiles, between the United States and the European Economic Community over agricultural trade, and between France and Germany over currency alignments come readily to mind. It is perhaps symbolic of the enormous success of early postwar foreign policy that issues no graver than these play such a prominent part in relations among countries that, earlier in the century, were sporadically at each other's throats.

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1 This definition of interdependence contrasts with that implicitly used by Kenneth Waltz, who emphasizes the importance of foreign trade to the welfare and security of the countries under consideration. See his “The Myth of Interdependence” in Kindleberger, C. P., ed., The International Corporation (Cambridge, Mass. 1970), 206210. As will be made clear below, trade may become less valuable to countries at the same time that it is becoming more sensitive to price, income, and other economic variables, and indeed for the same reasons.

2 For a more systematic review of the evidence of increased interdependence, see Cooper, , The Economics of Interdependence (New York 1968), chaps. 3–5; and Cooper, , “Towards an International Capital Market?” in Kindleberger, C. P. and Shonfield, A., eds., North American and Western European Economic Policies (New York 1971), 192208.

3 This second form of integration corresponds to what Karl Kaiser has called “intergovernmental regional subsystems,” to be distinguished from “transnational society subsystems,” of which economic integration through joined markets would represent one possible example. But joined markets also create pressures for intergovernmental action. See his “The Interaction of Regional Subsystems,” World Politics, xxi (October 1968), 84–107.

4 The term “autonomy” is preferred here to the more usual “economic sovereignty.” In fact, nations retain actual as well as legal control over their instruments of policy (sovereignty); the problem arises because these instruments of policy lose their effectiveness, so that countries find themselves able to pursue their objectives, but unable to achieve them.

5 For a general discussion of these issues as they affect foreign investment, see Kindleberger, Charles P., American Business Abroad (New Haven 1969).

6 Or worse. In 1963 Britain threatened to seize Pan American and TWA planes if the CAB did not back down from its insistence on regulating trans-Atlantic fares.

7 The actions by Britain, Denmark, and the Netherlands to halt “pirate” radio stations operating off their coasts in international waters also represent extraterritorial claims to jurisdiction, as does the unilateral extension, by Ecuador, Peru, Chile, and Iceland, of territorial claims far into international waters, in order to control rich fishing grounds.

8 See Bergsten, C. Fred, “Taking the Monetary Initiative,” Foreign Affairs, XLVI (July 1968), 713–32, who discusses the proposal but rejects it. It was, however, put into force by President Nixon while this essay was going to press.

9 This has long been true of trade policy, of course, and this fact has set trade policy apart from other aspects of foreign policy—a much wider range of political interests and persons had to be brought into the picture. Indeed, in the early 1930's, tariffs were considered exclusively a matter of domestic concern. Such success as trade policy has had as foreign policy has hinged on the brilliant idea of reciprocity, which in effect pits one set of domestic economic interests against another and thereby restores to the executive some of the freedom of action that he has in other areas of foreign policy. On the general relationship between domestic politics and foreign policy in Britain and the United States, see Waltz, Kenneth N., Foreign Policy and Democratic Politics (Boston 1967). Curiously, Waltz does not discuss trade policy at all; if he had, he might have qualified his judgment that the American executive has more scope for pursuing foreign policy than does the British Prime Minister.

10 A proposal along these lines can be found in Cooper, , “Sliding Parities: A Proposal for Presumptive Rules,” in Halm, George N., ed., Approaches to Greater Flexibility of Exchange Rates (Princeton 1970), 251–59. This volume contains extensive discussion of a number of similar proposals.

11 Some years ago Gunnar Myrdal identified and lamented the tension between national pursuit of domestic objectives that are desirable in themselves, and the preservation of an integrated international economy. He argued that the growth of the welfare state had led to disintegration of the world economy. I believe that this judgment unduly idealizes the “integration” of the world economy before the rise of the welfare state and that, in any case, it is premature; but the tension between national pursuit of national economic aims and the attainment of harmonious and unrestricted international transactions is certainly present, and indeed will become more acute. See Myrdal, , Beyond the Welfare State (London 1960), especially chap. 10.

12 This statement did not anticipate the extraordinarily aggressive response of the United States in President Nixon's New Economic Policy of August 1971. Imposition of the ten per cent surcharge on imports and declaration that the dollar would no longer be convertible into gold, without any prior consultation even with our closest allies, are bound to induce others to re-examine their dependence on, and trust in, the United States in matters of national security, and may even accelerate the proliferation of nuclear weapons.

12 See Falk, Richard A., “The Interplay of Westphalia and Charter Conceptions of International Legal Order,” in Falk, Richard A. and Black, Cyril E., eds., The Future of the International Legal Order, I, Trends and Patterns (Princeton 1969), 4348.

* An earlier version of this paper was presented in December 1970 at the Council af Foreign Relations' Conference on Trends Affecting International Relations.

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World Politics
  • ISSN: 0043-8871
  • EISSN: 1086-3338
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