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State Power and the Structure of International Trade

  • Stephen D. Krasner (a1)


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.



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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), 3161.

2 See, for instance, Hagen, Everett, “An Economic Justification of Protectionism,” Quarterly Journal of Economics, Vol. 72 (11 1958), 496514; 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), 334; and Bhagwati, Jagdish, Trade, Tariffs, and Growth (Cambridge: MIT Press 1969), 295308.

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

4 Hirschman (fn.3), 13–34.

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

6 See Calleo, David P. and Rowl, Benjamin and, America and the World Political Economy (Bloomington: Indiana University Press 1973), Part II, for a discussion of American thought; Heckscher, Eli, Mercantilism (New York: Macmillan 1955); and Coleman, D. C., ed., Revisions in Mercantilism (London: Methuen 1969), 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); Emmanuel, Arghiri, Unequal Exchange: A Study of the Imperialism of Trade (New York: Monthly Review 1972); and Galtung, Johan, “A Structural Theory of Imperialism,” Journal of Peace Research, VIII, No. 2 (1971), 81117, 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); 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), 223–55, ff some arguments concerning the benefits of trade.

8 See Johnson, Harry, Economic Policies Toward Less Developed Countries (New York: Praeger 1967), 9094, for a discussion of nominal versus effective tariffs; Belassa, Bela, Trade Liberalization among Industrial Countries (New York: McGraw-Hill 1967), chap. 3, 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), 200, 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), 2055; Pollard, Sidney, European Economic Integration 1820–1875 (London: Thames and Hudson 1974), 117; Condliffe, J. B., The Commerce of Nations (New York: Norton 1950), 212–23, 229–30.

10 Kindleberger, Charles P., “Group Behavior and International Trade,” Journal of Political Economy, Vol. 59 (02 1951), 33; Condliffe (fn. 9), 498; Pollard (fn. 9), 121; and Gourevitch, Peter A., “International Trade, Domestic Coalitions, and Liberty: Comparative Responses to the Great Depression of 1873–1896,” paper delivered to the International Studies Association Convention, Washington, 1973.

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

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

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

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), 551–72. Chadwick, Richard and Deutsch, Karl W., in “International Trade and Economic Integration: Further Developments in Trade Matrix Analysis,” Comparative Political Studies, VI (04 1973), 84109, 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.

16 League of Nations, Industrialization and Foreign Trade (1945, II.A.10), 13; Wilkins, Mira, The Emergence of Multinational Enterprise (Cambridge: Harvard University Press 1970), 4565.

17 Gallagher, John and Robinson, Ronald, “The Imperialism of Free Trade,” Economic History Review, 2nd Series, VI (08 1953), 115.

18 Kindleberger (fn. 9), 41.

19 Triffin, Robert, The Evolution of the International Monetary System (Princeton: Princeton Studies in International Finance, No. 12, 1964), 220; Hawtrey, R. G., The Gold Standard in Theory and Practice (London: Longmans, Green 1947), 6980; Yeager, Leland, International Monetary Relations (New York: Harper and Row 1966), 251–61; Rolfe, Sidney E. and Burtle, James, The Great Wheel: The World Monetary System, a Reinterpretation (New York: Quadrangle 1973), 1011; Condliffe (fn. 9), 343–80.

20 Aron, Raymond, The Imperial Republic (Englewood Cliffs, N.J.: Prentice-Hall 1973), 191; 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), 389; 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. 3; 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), 298310. 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).

32 See Kelly, Janet, “American Banks in London,” Ph.D. diss. (Johns Hopkins University 1975), 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), 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), 1617, as we as Huntington, Political Order in Changing Societies (New Haven: Yale University Press 1968), chap. 2.

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World Politics
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