Gowa: Allies, Adversaries, and International Trade

Gowa, J., 1994. Allies, Adversaries, and International Trade, Princeton University Press.

“In this book, I develop what I hope is an intuitively appealing and analytically rigorous explanation of the impact of power politics on inter-state trade. In order to do so, I construct a very simple game-theoretic model to address the question of substantive importance.. That question is whether free trade is more likely within than across alliances. More precisely, I address this question: Under what, if any, conditions does it make sense for states to trad3e more freely with their allies than with their adversaries?” (5-6).

“…I analyze the impact of the anarchic structure of international politics on the exchange of goods and services among states. Prior to doing so, I argue that hegemonic stability theory, the preeminent system-level theory of the relationship between power politics and free trade, does not resolve the question of the political correlates of open international markets…Here, I* summarize the core argument of this book. I contend that the play of power politics is an inexorable element of any agreement to open international markets, because of the security externalities that trade produces. These externalities arise because the source of gains from trade is the increased efficiency with which domestic resources can be employed. As a consequence, trade frees economic resources for military uses. Thus, trade enhances the potential military power of any country that engages in it. The anarchic structure of the international system…compels its constitute states to attend closely to the military power and potential of both prospective and actual allies and adversaries. It does so because the absence of any supranational authority in the international system enables a state either to threaten or to actually resort to force at any time to achieve its goals. The probability that a state will do so depends in part upon its power. The latter, in turn, depends partially upon its real income. As a consequence, the real-income gains that motivate free trade are also the source of the security externalities that can either impede or facilitate trade: Trade with an adversary produces a security diseconomy; trade with an ally produces a positive externality. In either case, agreements to open international markets create a divergence between the private and social costs of trade…In other words, because trade generates security externalities adherence to a policy of free and non-discriminatory trade may not be optimal for states in an anarchic international system…I consider these external effects explicitly. Doing so leads me to two conclusions: (1) free trade is more likely within than across political-0miliitary alliances; and (2) the evolutionary prospects of alliances vary: those that are the products of bipolar systems are more likely to evolve into free-trade coalitions than are their mutipolar counterparts” (6-7).

Kindleberger is seen as the father of hegemonic stability theory, though he preferred to use the word “leader” to “hegemon”, as the later connoted control and coercion. The argument went something like this: international trade is a public good, and in order to have this public good be freely available, there had to be a hegemon to support its diffusion. Public goods are non-rival and non-excludable (the examples given by Gowa are nuclear deterrence and clean air). With public goods, there is obviously the problem of free riders in rationalist models.

Gowa then explores alliances from a rationalist perspective. He defines an alliance as, following Holsti, Hopmann and Sullivan, “a formal agreement between two or more nations to collaborate on national security issues” (32). Gowa points out three kinds of alliances: defense pacts, nonaggression pacts and ententes mandating cooperation in war (32). Alliances can make sense from a realist perspective when they successfully balance.

“Trade with an ally produces a positive externality; trade with an adversary creates a security diseconomy. A s a result, ceteris paribus, free trade is more likely within than across political-military alliances” (120).

Jervis: Cooperation Under the Security Dilemma

Jervis, R. 1978. “Cooperation Under the Security Dilemma.” World Politics 30:167-214.

“The lack of international sovereign not only permits wars to occur, but also makes it difficult for states that are satisfied with the status quo to arrive at goals that they recognize as being in their common interest” (167). This is generally referred to as the security dilemma, where states want to improve their security position, but find that their defensive fortification actually represents a threat to other countries. This is possible because of the lack of a global archy.

A similar situation can be observed in Rousseau’s Stag Hunt. The article uses a game theory approach to understanding the preference ordering of states in the security dilemma. States first want to cooperate, secondly want to defect, thirdly want everyone to defect and fourthly want to be stuck hunting the stag when someone else chases the rabbit.

“Given this gloomy picture, the obvious question is, why are we not all dead? Or, to put it less starkly, what kinds of variables ameliorate the impact of anarchy and the security dilemma?” (170). You can improve the gains that result from mutual cooperation. You can increase the cost of defecting. You can also improve the reliability and robustness of information flow to make sure that both sides are more reasonably assured that the other will cooperate.

Jervis also highlights a subjective nature security: states may subjectively approach issues such as the amount of defense they need, or the amount of countries they feel threatened by. Additionally, states may be unsure as to the degree that other states will or will not cooperate, i.e., they may have a subjective understanding of the nature of the threat posed by others.

Jervis additionally points out that different kinds of war can emerge from situations where either “offense” or “defense” predominates, i.e., whether or not it is more likely to be successful being defensive or offensive. These variables, along with others, create the “Four Worlds” of Jervis that divide on two axes of uncertainty: whether offense or defense has the advantage, and whether or not the two positions are distinguishable from one another.