The free trade epidemic of the 1860s and other outbreaks of economic discrimination

World Politics

Volumn 51, Issue 4, 1999, Pages 447-

  Lazer, David ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMIC HISTORY; FREE TRADE; HISTORICAL GEOGRAPHY; NINETEENTH CENTURY;

EUROPE;

EID: 0342680235     PISSN: 00438871     EISSN: None     Source Type: Journal    
DOI: 10.1017/s0043887100009229     Document Type: Article

References (133)

1. World Trade Organization, Regionalism and the World Trading System (Geneva: World Trade Organization, 1995).
2. Note that concessions became effectively multilateral because the unconditional (as compared with the conditional) MFN clause specifies that concessions made by the signatories to third parties must be granted to signatories of the treaty for no additional compensation; see S. K. Hornbeck, "The Most- Favored-Nation Clause in Commercial Treaties," Bulletin of the University of Wisconsin (February 1910), 343. States did develop means to keep concessions bilateral, for example, through minute subdivisions in tariff categories; see, e.g., D. C. M. Platt, Finance, Trade, and Politics in British Foreign Policy, 1825-1914 (Oxford: Clarendon Press, 1971), 93.
3. Note that concessions became effectively multilateral because the unconditional (as compared with the conditional) MFN clause specifies that concessions made by the signatories to third parties must be granted to signatories of the treaty for no additional compensation; see S. K. Hornbeck, "The Most- Favored-Nation Clause in Commercial Treaties," Bulletin of the University of Wisconsin (February 1910), 343. States did develop means to keep concessions bilateral, for example, through minute subdivisions in tariff categories; see, e.g., D. C. M. Platt, Finance, Trade, and Politics in British Foreign Policy, 1825-1914 (Oxford: Clarendon Press, 1971), 93.
4. This matches the argument of hegemonic stability theory. For example, see C. P. Kindleberger, The World in Depression, 1929-1939 (Berkeley: University of California Press, 1973); and Robert Gilpin, War and Change in World Politics (Cambridge: Cambridge University Press, 1981). Also, for a valuable critique of hegemonic stability theory, see David Lake, "Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential?" International Studies Quarterly 37 (December 1993).
5. This matches the argument of hegemonic stability theory. For example, see C. P. Kindleberger, The World in Depression, 1929-1939 (Berkeley: University of California Press, 1973); and Robert Gilpin, War and Change in World Politics (Cambridge: Cambridge University Press, 1981). Also, for a valuable critique of hegemonic stability theory, see David Lake, "Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential?" International Studies Quarterly 37 (December 1993).
6. This matches the argument of hegemonic stability theory. For example, see C. P. Kindleberger, The World in Depression, 1929-1939 (Berkeley: University of California Press, 1973); and Robert Gilpin, War and Change in World Politics (Cambridge: Cambridge University Press, 1981). Also, for a valuable critique of hegemonic stability theory, see David Lake, "Leadership, Hegemony, and the International Economy: Naked Emperor or Tattered Monarch with Potential?" International Studies Quarterly 37 (December 1993).
7. Notably, the tariff levels of European states in the nineteenth century were not correlated with the degree of concentration of power in the international system. See Timothy J. McKeown, "Hegemonic Stability and the Nineteenth Century Tariff Levels in Europe," International Organization 37 (Winter 1983).
8. The first major work in the study of emergent systems was Thomas Schelling, Micromotives and Macrobehavior (New York: W. W. Norton, 1978). Recent efforts in this direction include Robert Axelrod, The Complexity of Cooperation: Agent-Based Models of Competition and Collaboration (Princeton: Princeton University Press, 1997); and Joshua M. Epstein and Robert A. Axtell, Growing Artificial Societies: Social Science from the Bottom Up (Washington, D.C.: Brookings Institution, 1996). For economic models of this genre, see Paul Krugman, The Self-Organizing Economy (Cambridge: Blackwell Publishers, 1996); and J. A. Scheinkman and M. Woodford, "Self-Organized Criticality and Economic Fluctuations," American Economic Review 84 (May 1994), 417-21.
9. The first major work in the study of emergent systems was Thomas Schelling, Micromotives and Macrobehavior (New York: W. W. Norton, 1978). Recent efforts in this direction include Robert Axelrod, The Complexity of Cooperation: Agent-Based Models of Competition and Collaboration (Princeton: Princeton University Press, 1997); and Joshua M. Epstein and Robert A. Axtell, Growing Artificial Societies: Social Science from the Bottom Up (Washington, D.C.: Brookings Institution, 1996). For economic models of this genre, see Paul Krugman, The Self-Organizing Economy (Cambridge: Blackwell Publishers, 1996); and J. A. Scheinkman and M. Woodford, "Self-Organized Criticality and Economic Fluctuations," American Economic Review 84 (May 1994), 417-21.
10. The first major work in the study of emergent systems was Thomas Schelling, Micromotives and Macrobehavior (New York: W. W. Norton, 1978). Recent efforts in this direction include Robert Axelrod, The Complexity of Cooperation: Agent-Based Models of Competition and Collaboration (Princeton: Princeton University Press, 1997); and Joshua M. Epstein and Robert A. Axtell, Growing Artificial Societies: Social Science from the Bottom Up (Washington, D.C.: Brookings Institution, 1996). For economic models of this genre, see Paul Krugman, The Self-Organizing Economy (Cambridge: Blackwell Publishers, 1996); and J. A. Scheinkman and M. Woodford, "Self-Organized Criticality and Economic Fluctuations," American Economic Review 84 (May 1994), 417-21.
11. The first major work in the study of emergent systems was Thomas Schelling, Micromotives and Macrobehavior (New York: W. W. Norton, 1978). Recent efforts in this direction include Robert Axelrod, The Complexity of Cooperation: Agent-Based Models of Competition and Collaboration (Princeton: Princeton University Press, 1997); and Joshua M. Epstein and Robert A. Axtell, Growing Artificial Societies: Social Science from the Bottom Up (Washington, D.C.: Brookings Institution, 1996). For economic models of this genre, see Paul Krugman, The Self-Organizing Economy (Cambridge: Blackwell Publishers, 1996); and J. A. Scheinkman and M. Woodford, "Self-Organized Criticality and Economic Fluctuations," American Economic Review 84 (May 1994), 417-21.
12. The first major work in the study of emergent systems was Thomas Schelling, Micromotives and Macrobehavior (New York: W. W. Norton, 1978). Recent efforts in this direction include Robert Axelrod, The Complexity of Cooperation: Agent-Based Models of Competition and Collaboration (Princeton: Princeton University Press, 1997); and Joshua M. Epstein and Robert A. Axtell, Growing Artificial Societies: Social Science from the Bottom Up (Washington, D.C.: Brookings Institution, 1996). For economic models of this genre, see Paul Krugman, The Self-Organizing Economy (Cambridge: Blackwell Publishers, 1996); and J. A. Scheinkman and M. Woodford, "Self-Organized Criticality and Economic Fluctuations," American Economic Review 84 (May 1994), 417-21.
13. Kenneth Oye, Economic Discrimination and Political Exchange: World Political Economy in the 1830s and 1980s (Princeton: Princeton University Press, 1992); Michael J. Gilligan, Empowering Exporters (Ann Arbor: University of Michigan Press, 1997); and Richard Baldwin, "A Domino Theory of Regionalism," in Jagdish Bhagwati, Pravin Krishna, and Arvind Panagariya, Trading Blocs: Alternative Approaches to Analyzing Preferential Trade Agreements (Cambridge: MIT Press, 1999).
14. Kenneth Oye, Economic Discrimination and Political Exchange: World Political Economy in the 1830s and 1980s (Princeton: Princeton University Press, 1992); Michael J. Gilligan, Empowering Exporters (Ann Arbor: University of Michigan Press, 1997); and Richard Baldwin, "A Domino Theory of Regionalism," in Jagdish Bhagwati, Pravin Krishna, and Arvind Panagariya, Trading Blocs: Alternative Approaches to Analyzing Preferential Trade Agreements (Cambridge: MIT Press, 1999).
15. Kenneth Oye, Economic Discrimination and Political Exchange: World Political Economy in the 1830s and 1980s (Princeton: Princeton University Press, 1992); Michael J. Gilligan, Empowering Exporters (Ann Arbor: University of Michigan Press, 1997); and Richard Baldwin, "A Domino Theory of Regionalism," in Jagdish Bhagwati, Pravin Krishna, and Arvind Panagariya, Trading Blocs: Alternative Approaches to Analyzing Preferential Trade Agreements (Cambridge: MIT Press, 1999).
16. There is a large literature on the economics of customs unions, with a welter of findings (often contradictory) regarding exactly when customs unions may be harmful to the welfare of members. The starting point of modern research on customs unions is Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). More recent landmarks include Raymond Riezman, "A 3 x 3 Model of Customs Unions," Journal of International Economics 9 (August 1979); P. J. Lloyd, "3 x 3 Theory of Customs Unions," Journal of International Economics 12 (February 1982); and Ian Wooton, "Preferential Trading Agreements: An Investigation," Journal of International Economics 21 (August 1986). For a striking illustration of the fact that a world dominated by a few customs unions may be associated with lower world welfare than a world of no trade blocs (even holding tariffs constant), see Paul Krugman, "The Move toward Free Trade Zones," in Policy Implications of Trade and Currency Zones: A Symposium Sponsored by the Federal Reserve Bank of Kansas City (Kansas City, Mo.: Federal Reserve Bank of Kansas City, 1991); and Eric Bond and Constantinos Syropoulos, "The Size of Trading Blocs: Market Power and World Welfare Effects," Journal of International Economics 40 (May 1996). Kemp and Wan demonstrate, however, that there is always a level of postunion tariffs that is Pareto-improving for both PTA members and nonmembers; see Murray C. Kemp and Henry Y. Wan, Jr., "An Elementary Proposition Concerning the Formation of Customs Unions," Journal of International Economics 6 (February 1976), 95-97.
17. There is a large literature on the economics of customs unions, with a welter of findings (often contradictory) regarding exactly when customs unions may be harmful to the welfare of members. The starting point of modern research on customs unions is Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). More recent landmarks include Raymond Riezman, "A 3 x 3 Model of Customs Unions," Journal of International Economics 9 (August 1979); P. J. Lloyd, "3 x 3 Theory of Customs Unions," Journal of International Economics 12 (February 1982); and Ian Wooton, "Preferential Trading Agreements: An Investigation," Journal of International Economics 21 (August 1986). For a striking illustration of the fact that a world dominated by a few customs unions may be associated with lower world welfare than a world of no trade blocs (even holding tariffs constant), see Paul Krugman, "The Move toward Free Trade Zones," in Policy Implications of Trade and Currency Zones: A Symposium Sponsored by the Federal Reserve Bank of Kansas City (Kansas City, Mo.: Federal Reserve Bank of Kansas City, 1991); and Eric Bond and Constantinos Syropoulos, "The Size of Trading Blocs: Market Power and World Welfare Effects," Journal of International Economics 40 (May 1996). Kemp and Wan demonstrate, however, that there is always a level of postunion tariffs that is Pareto-improving for both PTA members and nonmembers; see Murray C. Kemp and Henry Y. Wan, Jr., "An Elementary Proposition Concerning the Formation of Customs Unions," Journal of International Economics 6 (February 1976), 95-97.
18. There is a large literature on the economics of customs unions, with a welter of findings (often contradictory) regarding exactly when customs unions may be harmful to the welfare of members. The starting point of modern research on customs unions is Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). More recent landmarks include Raymond Riezman, "A 3 x 3 Model of Customs Unions," Journal of International Economics 9 (August 1979); P. J. Lloyd, "3 x 3 Theory of Customs Unions," Journal of International Economics 12 (February 1982); and Ian Wooton, "Preferential Trading Agreements: An Investigation," Journal of International Economics 21 (August 1986). For a striking illustration of the fact that a world dominated by a few customs unions may be associated with lower world welfare than a world of no trade blocs (even holding tariffs constant), see Paul Krugman, "The Move toward Free Trade Zones," in Policy Implications of Trade and Currency Zones: A Symposium Sponsored by the Federal Reserve Bank of Kansas City (Kansas City, Mo.: Federal Reserve Bank of Kansas City, 1991); and Eric Bond and Constantinos Syropoulos, "The Size of Trading Blocs: Market Power and World Welfare Effects," Journal of International Economics 40 (May 1996). Kemp and Wan demonstrate, however, that there is always a level of postunion tariffs that is Pareto-improving for both PTA members and nonmembers; see Murray C. Kemp and Henry Y. Wan, Jr., "An Elementary Proposition Concerning the Formation of Customs Unions," Journal of International Economics 6 (February 1976), 95-97.
19. There is a large literature on the economics of customs unions, with a welter of findings (often contradictory) regarding exactly when customs unions may be harmful to the welfare of members. The starting point of modern research on customs unions is Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). More recent landmarks include Raymond Riezman, "A 3 x 3 Model of Customs Unions," Journal of International Economics 9 (August 1979); P. J. Lloyd, "3 x 3 Theory of Customs Unions," Journal of International Economics 12 (February 1982); and Ian Wooton, "Preferential Trading Agreements: An Investigation," Journal of International Economics 21 (August 1986). For a striking illustration of the fact that a world dominated by a few customs unions may be associated with lower world welfare than a world of no trade blocs (even holding tariffs constant), see Paul Krugman, "The Move toward Free Trade Zones," in Policy Implications of Trade and Currency Zones: A Symposium Sponsored by the Federal Reserve Bank of Kansas City (Kansas City, Mo.: Federal Reserve Bank of Kansas City, 1991); and Eric Bond and Constantinos Syropoulos, "The Size of Trading Blocs: Market Power and World Welfare Effects," Journal of International Economics 40 (May 1996). Kemp and Wan demonstrate, however, that there is always a level of postunion tariffs that is Pareto-improving for both PTA members and nonmembers; see Murray C. Kemp and Henry Y. Wan, Jr., "An Elementary Proposition Concerning the Formation of Customs Unions," Journal of International Economics 6 (February 1976), 95-97.
20. There is a large literature on the economics of customs unions, with a welter of findings (often contradictory) regarding exactly when customs unions may be harmful to the welfare of members. The starting point of modern research on customs unions is Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). More recent landmarks include Raymond Riezman, "A 3 x 3 Model of Customs Unions," Journal of International Economics 9 (August 1979); P. J. Lloyd, "3 x 3 Theory of Customs Unions," Journal of International Economics 12 (February 1982); and Ian Wooton, "Preferential Trading Agreements: An Investigation," Journal of International Economics 21 (August 1986). For a striking illustration of the fact that a world dominated by a few customs unions may be associated with lower world welfare than a world of no trade blocs (even holding tariffs constant), see Paul Krugman, "The Move toward Free Trade Zones," in Policy Implications of Trade and Currency Zones: A Symposium Sponsored by the Federal Reserve Bank of Kansas City (Kansas City, Mo.: Federal Reserve Bank of Kansas City, 1991); and Eric Bond and Constantinos Syropoulos, "The Size of Trading Blocs: Market Power and World Welfare Effects," Journal of International Economics 40 (May 1996). Kemp and Wan demonstrate, however, that there is always a level of postunion tariffs that is Pareto-improving for both PTA members and nonmembers; see Murray C. Kemp and Henry Y. Wan, Jr., "An Elementary Proposition Concerning the Formation of Customs Unions," Journal of International Economics 6 (February 1976), 95-97.
21. There is a large literature on the economics of customs unions, with a welter of findings (often contradictory) regarding exactly when customs unions may be harmful to the welfare of members. The starting point of modern research on customs unions is Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). More recent landmarks include Raymond Riezman, "A 3 x 3 Model of Customs Unions," Journal of International Economics 9 (August 1979); P. J. Lloyd, "3 x 3 Theory of Customs Unions," Journal of International Economics 12 (February 1982); and Ian Wooton, "Preferential Trading Agreements: An Investigation," Journal of International Economics 21 (August 1986). For a striking illustration of the fact that a world dominated by a few customs unions may be associated with lower world welfare than a world of no trade blocs (even holding tariffs constant), see Paul Krugman, "The Move toward Free Trade Zones," in Policy Implications of Trade and Currency Zones: A Symposium Sponsored by the Federal Reserve Bank of Kansas City (Kansas City, Mo.: Federal Reserve Bank of Kansas City, 1991); and Eric Bond and Constantinos Syropoulos, "The Size of Trading Blocs: Market Power and World Welfare Effects," Journal of International Economics 40 (May 1996). Kemp and Wan demonstrate, however, that there is always a level of postunion tariffs that is Pareto-improving for both PTA members and nonmembers; see Murray C. Kemp and Henry Y. Wan, Jr., "An Elementary Proposition Concerning the Formation of Customs Unions," Journal of International Economics 6 (February 1976), 95-97.
22. There is a large literature on the economics of customs unions, with a welter of findings (often contradictory) regarding exactly when customs unions may be harmful to the welfare of members. The starting point of modern research on customs unions is Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950). More recent landmarks include Raymond Riezman, "A 3 x 3 Model of Customs Unions," Journal of International Economics 9 (August 1979); P. J. Lloyd, "3 x 3 Theory of Customs Unions," Journal of International Economics 12 (February 1982); and Ian Wooton, "Preferential Trading Agreements: An Investigation," Journal of International Economics 21 (August 1986). For a striking illustration of the fact that a world dominated by a few customs unions may be associated with lower world welfare than a world of no trade blocs (even holding tariffs constant), see Paul Krugman, "The Move toward Free Trade Zones," in Policy Implications of Trade and Currency Zones: A Symposium Sponsored by the Federal Reserve Bank of Kansas City (Kansas City, Mo.: Federal Reserve Bank of Kansas City, 1991); and Eric Bond and Constantinos Syropoulos, "The Size of Trading Blocs: Market Power and World Welfare Effects," Journal of International Economics 40 (May 1996). Kemp and Wan demonstrate, however, that there is always a level of postunion tariffs that is Pareto-improving for both PTA members and nonmembers; see Murray C. Kemp and Henry Y. Wan, Jr., "An Elementary Proposition Concerning the Formation of Customs Unions," Journal of International Economics 6 (February 1976), 95-97.
23. In principle, dyadic in this context incorporates PTAs with more than two members. None of the treaties signed during the 1860s had more than two parties, however.
24. See Ronald Rogowski, Commerce and Coalitions: How Trade Affects Domestic Political Alignments (Princeton: Princeton University Press, 1989). Notably, however, Rogowski demonstrated how long-run coalitions form around trade issues, whereas a coalition resulting from a particular PTA would presumably reflect a short-run congruence of interests.
25. For example, Daniel Trefler, "Trade Liberalization and the Theory of Endogenous Protection," Journal of Political Economy 101 (February 1993); M. Finger and A. Harrison, "The MFA Paradox: More Protection and More Trade?" (Manuscript, World Bank, 1995); and Helen Milner, Resisting Protectionism: Global Industries and the Politics of International Trade (Princeton: Princeton University Press, 1988).
26. For example, Daniel Trefler, "Trade Liberalization and the Theory of Endogenous Protection," Journal of Political Economy 101 (February 1993); M. Finger and A. Harrison, "The MFA Paradox: More Protection and More Trade?" (Manuscript, World Bank, 1995); and Helen Milner, Resisting Protectionism: Global Industries and the Politics of International Trade (Princeton: Princeton University Press, 1988).
27. For example, Daniel Trefler, "Trade Liberalization and the Theory of Endogenous Protection," Journal of Political Economy 101 (February 1993); M. Finger and A. Harrison, "The MFA Paradox: More Protection and More Trade?" (Manuscript, World Bank, 1995); and Helen Milner, Resisting Protectionism: Global Industries and the Politics of International Trade (Princeton: Princeton University Press, 1988).
28. There is a third alternative - multilateral reductions in tariffs, as has occurred under the auspices of GATT in the post-World War II period. There was no equivalent forum to pursue multilateral reductions in tariffs in the 1860s. Why there was no equivalent of GATT during the 1860s is an interesting question but one not pursued here.
29. Oye (fn. 6); and Gilligan (fn. 6). Closely related are the arguments of I. M. Destler and John Odell, Anti-Protection: Changing Forces in the United States Trade Politics (Washington, D.C.: Institute for International Economics, 1987). While they do not directly discuss PTAs, they do point out that potential retaliation from country A in response to protectionist measures in country B may have a very focused distributional impact on exporters in B.
30. Oye (fn. 6); and Gilligan (fn. 6). Closely related are the arguments of I. M. Destler and John Odell, Anti-Protection: Changing Forces in the United States Trade Politics (Washington, D.C.: Institute for International Economics, 1987). While they do not directly discuss PTAs, they do point out that potential retaliation from country A in response to protectionist measures in country B may have a very focused distributional impact on exporters in B.
31. Political economy models illustrating the possibility of a prisoners' dilemma structure of payoffs of a PTA include Robert Pahre, "Reactions, Reciprocity, and Retaliation: A Model of Tariff Policy Linking State and Domestic Interests" (Manuscript, 1994); and Gene Grossman and Elhanan Helpman, "Trade Wars and Trade Talks," Journal of Political Economy 103 (August 1995). See also Robert Putnam, "Diplomacy and Domestic Politics: The Logic of Two-Level Games," International Organization 42 (Summer 1988). Closely related are H. G. Johnson, "Optimum Tariffs and Retaliation," Review of Economic Studies 21, no. 55 (1954); Raymond Riezman, "Tariff Retaliation from a Strategic Viewpoint," Southern Economic Journal 48 (January 1978); and John Conybeare, Trade Wars: The Theory and Practice of International Commercial Rivalry (New York: Columbia University Press, 1987). These last three assert that states may face a prisoners' dilemma with respect to the imposition of optimal tariffs to improve terms of trade.
32. Political economy models illustrating the possibility of a prisoners' dilemma structure of payoffs of a PTA include Robert Pahre, "Reactions, Reciprocity, and Retaliation: A Model of Tariff Policy Linking State and Domestic Interests" (Manuscript, 1994); and Gene Grossman and Elhanan Helpman, "Trade Wars and Trade Talks," Journal of Political Economy 103 (August 1995). See also Robert Putnam, "Diplomacy and Domestic Politics: The Logic of Two-Level Games," International Organization 42 (Summer 1988). Closely related are H. G. Johnson, "Optimum Tariffs and Retaliation," Review of Economic Studies 21, no. 55 (1954); Raymond Riezman, "Tariff Retaliation from a Strategic Viewpoint," Southern Economic Journal 48 (January 1978); and John Conybeare, Trade Wars: The Theory and Practice of International Commercial Rivalry (New York: Columbia University Press, 1987). These last three assert that states may face a prisoners' dilemma with respect to the imposition of optimal tariffs to improve terms of trade.
33. Political economy models illustrating the possibility of a prisoners' dilemma structure of payoffs of a PTA include Robert Pahre, "Reactions, Reciprocity, and Retaliation: A Model of Tariff Policy Linking State and Domestic Interests" (Manuscript, 1994); and Gene Grossman and Elhanan Helpman, "Trade Wars and Trade Talks," Journal of Political Economy 103 (August 1995). See also Robert Putnam, "Diplomacy and Domestic Politics: The Logic of Two-Level Games," International Organization 42 (Summer 1988). Closely related are H. G. Johnson, "Optimum Tariffs and Retaliation," Review of Economic Studies 21, no. 55 (1954); Raymond Riezman, "Tariff Retaliation from a Strategic Viewpoint," Southern Economic Journal 48 (January 1978); and John Conybeare, Trade Wars: The Theory and Practice of International Commercial Rivalry (New York: Columbia University Press, 1987). These last three assert that states may face a prisoners' dilemma with respect to the imposition of optimal tariffs to improve terms of trade.
34. Political economy models illustrating the possibility of a prisoners' dilemma structure of payoffs of a PTA include Robert Pahre, "Reactions, Reciprocity, and Retaliation: A Model of Tariff Policy Linking State and Domestic Interests" (Manuscript, 1994); and Gene Grossman and Elhanan Helpman, "Trade Wars and Trade Talks," Journal of Political Economy 103 (August 1995). See also Robert Putnam, "Diplomacy and Domestic Politics: The Logic of Two-Level Games," International Organization 42 (Summer 1988). Closely related are H. G. Johnson, "Optimum Tariffs and Retaliation," Review of Economic Studies 21, no. 55 (1954); Raymond Riezman, "Tariff Retaliation from a Strategic Viewpoint," Southern Economic Journal 48 (January 1978); and John Conybeare, Trade Wars: The Theory and Practice of International Commercial Rivalry (New York: Columbia University Press, 1987). These last three assert that states may face a prisoners' dilemma with respect to the imposition of optimal tariffs to improve terms of trade.
35. Political economy models illustrating the possibility of a prisoners' dilemma structure of payoffs of a PTA include Robert Pahre, "Reactions, Reciprocity, and Retaliation: A Model of Tariff Policy Linking State and Domestic Interests" (Manuscript, 1994); and Gene Grossman and Elhanan Helpman, "Trade Wars and Trade Talks," Journal of Political Economy 103 (August 1995). See also Robert Putnam, "Diplomacy and Domestic Politics: The Logic of Two-Level Games," International Organization 42 (Summer 1988). Closely related are H. G. Johnson, "Optimum Tariffs and Retaliation," Review of Economic Studies 21, no. 55 (1954); Raymond Riezman, "Tariff Retaliation from a Strategic Viewpoint," Southern Economic Journal 48 (January 1978); and John Conybeare, Trade Wars: The Theory and Practice of International Commercial Rivalry (New York: Columbia University Press, 1987). These last three assert that states may face a prisoners' dilemma with respect to the imposition of optimal tariffs to improve terms of trade.
36. Political economy models illustrating the possibility of a prisoners' dilemma structure of payoffs of a PTA include Robert Pahre, "Reactions, Reciprocity, and Retaliation: A Model of Tariff Policy Linking State and Domestic Interests" (Manuscript, 1994); and Gene Grossman and Elhanan Helpman, "Trade Wars and Trade Talks," Journal of Political Economy 103 (August 1995). See also Robert Putnam, "Diplomacy and Domestic Politics: The Logic of Two-Level Games," International Organization 42 (Summer 1988). Closely related are H. G. Johnson, "Optimum Tariffs and Retaliation," Review of Economic Studies 21, no. 55 (1954); Raymond Riezman, "Tariff Retaliation from a Strategic Viewpoint," Southern Economic Journal 48 (January 1978); and John Conybeare, Trade Wars: The Theory and Practice of International Commercial Rivalry (New York: Columbia University Press, 1987). These last three assert that states may face a prisoners' dilemma with respect to the imposition of optimal tariffs to improve terms of trade.
37. Oye (fn. 6) labels these "divertable externalities," in that the costs to a particular third party may be diverted to fourth parties by extending the market access to that third party.
38. For example, Grossman and Helpman showed, using a median voter model, that free-trade areas are more likely to garner political support when trade diversion outweighs trade creation; see Gene Grossman and Elhanan Helpman, The Politics of Free Trade Agreements, Working Paper 4597 (Cambridge: National Bureau of Economic Research, 1993).
39. For an insightful discussion of this point, see Dani Rodrik, "Political Economy of Trade Policy," in Gene Grossman and Kenneth Rogoff, eds., Handbook of International Economics (New York: Elsevier, 1995).
40. Baldwin (fn. 6).
41. Ibid.
42. Helen Milner, "Industries, Governments, and the Creation of Regional Trade Blocs," in John G. Ruggie, ed., The Political Economy of Regionalism (New York: Columbia University Press, 1997).
43. For an early and insightful discussion of the interrelationship between preference/discrimination and product differentiation, see Frederic Benham, Great Britain under Protection (New York: Macmillan 1941). For a discussion of why political mobilization of sectors is more likely when the goods produced are differentiated, see also Michael Gilligan, "Lobbying as a Private Good with Intra-Industry Trade," International Studies Quarterly 41 (September 1997).
44. For an early and insightful discussion of the interrelationship between preference/discrimination and product differentiation, see Frederic Benham, Great Britain under Protection (New York: Macmillan 1941). For a discussion of why political mobilization of sectors is more likely when the goods produced are differentiated, see also Michael Gilligan, "Lobbying as a Private Good with Intra-Industry Trade," International Studies Quarterly 41 (September 1997).
45. Percy Ashley, Modern Tariff History: Germany-United States-France (New York: E. P. Dutton, 1926), 326.
46. Ibid., 327.
47. For an intriguing analysis that applies coalition theory to customs-union formation, see Sang-Seung Yi, "Endogenous Formation of Customs Unions under Imperfect Competition: Open Regionalism Is Good," Journal of International Economics 41 (August 1996).
48. See Thomas Valente, Network Models of the Diffusion of Innovations (Cresskill, N.Y.: Hampton Press, 1995). For a discussion of diffusion processes and a consideration of diffusion through some central source versus diffusion via contagion, see Charles Lave and James March, An Introduction to Models in the Social Sciences (New York: Harper and Row, 1975). For a classic analysis of diffusion processes, see James Coleman, E. Katz, and H. Menzel, Medical Innovation: A Diffusion Study (Indianapolis, Ind.: Bobbs-Merrill, 1966). For a recent discussion, see Everett Rogers, Diffusion of Innovations (New York: Free Press, 1995).
49. See Thomas Valente, Network Models of the Diffusion of Innovations (Cresskill, N.Y.: Hampton Press, 1995). For a discussion of diffusion processes and a consideration of diffusion through some central source versus diffusion via contagion, see Charles Lave and James March, An Introduction to Models in the Social Sciences (New York: Harper and Row, 1975). For a classic analysis of diffusion processes, see James Coleman, E. Katz, and H. Menzel, Medical Innovation: A Diffusion Study (Indianapolis, Ind.: Bobbs-Merrill, 1966). For a recent discussion, see Everett Rogers, Diffusion of Innovations (New York: Free Press, 1995).
50. See Thomas Valente, Network Models of the Diffusion of Innovations (Cresskill, N.Y.: Hampton Press, 1995). For a discussion of diffusion processes and a consideration of diffusion through some central source versus diffusion via contagion, see Charles Lave and James March, An Introduction to Models in the Social Sciences (New York: Harper and Row, 1975). For a classic analysis of diffusion processes, see James Coleman, E. Katz, and H. Menzel, Medical Innovation: A Diffusion Study (Indianapolis, Ind.: Bobbs-Merrill, 1966). For a recent discussion, see Everett Rogers, Diffusion of Innovations (New York: Free Press, 1995).
51. See Thomas Valente, Network Models of the Diffusion of Innovations (Cresskill, N.Y.: Hampton Press, 1995). For a discussion of diffusion processes and a consideration of diffusion through some central source versus diffusion via contagion, see Charles Lave and James March, An Introduction to Models in the Social Sciences (New York: Harper and Row, 1975). For a classic analysis of diffusion processes, see James Coleman, E. Katz, and H. Menzel, Medical Innovation: A Diffusion Study (Indianapolis, Ind.: Bobbs-Merrill, 1966). For a recent discussion, see Everett Rogers, Diffusion of Innovations (New York: Free Press, 1995).
52. This is a relatively reasonable assumption in the domain of trade, where iteration is high, fostering mutual cooperation. See Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984). Of course, there may be substantial conflict over the distribution of the gains of cooperation, sometimes leading to mutual defection, as the occasional trade wars of the 1880s and 1890s attest (e.g., France-Italy, Germany-Russia).
53. Herbert Simon, Models of Man (New York: Wiley, 1957).
54. Susanne Lohmann, "The Dynamics of Informational Cascades: The Monday Demonstrations in Leipzig, East Germany, 1989-91," World Politics 47 (October 1994); Mark Granovetter, "Threshold Models of Collective Behavior," American Journal of Sociology 83 (May 1978); Mark Granovetter and R. Soong, "Threshold Models of Diversity: Chinese Restaurants, Residential Segregation, and the Spiral of Silence," in C. Clogg, ed., Sociological Methodology, vol. 18 (Washington, D.C.: American Sociological Association, 1988).
55. Susanne Lohmann, "The Dynamics of Informational Cascades: The Monday Demonstrations in Leipzig, East Germany, 1989-91," World Politics 47 (October 1994); Mark Granovetter, "Threshold Models of Collective Behavior," American Journal of Sociology 83 (May 1978); Mark Granovetter and R. Soong, "Threshold Models of Diversity: Chinese Restaurants, Residential Segregation, and the Spiral of Silence," in C. Clogg, ed., Sociological Methodology, vol. 18 (Washington, D.C.: American Sociological Association, 1988).
56. Susanne Lohmann, "The Dynamics of Informational Cascades: The Monday Demonstrations in Leipzig, East Germany, 1989-91," World Politics 47 (October 1994); Mark Granovetter, "Threshold Models of Collective Behavior," American Journal of Sociology 83 (May 1978); Mark Granovetter and R. Soong, "Threshold Models of Diversity: Chinese Restaurants, Residential Segregation, and the Spiral of Silence," in C. Clogg, ed., Sociological Methodology, vol. 18 (Washington, D.C.: American Sociological Association, 1988).
57. Valente (fn. 24).
58. ik.
59. A lattice also has the advantage of making it easier to visualize the process of contagion, as the example below illustrates.
60. The exact amount the thresholds should be lowered is arbitrary. Lowering thresholds by 1 has the benefit in terms of ease of interpretation of the simulations in that when a state has δ partners, it will definitely sign treaties with its remaining neighbors.
61. The sum of the thresholds ≅ 40 (number of dyads) × 1.5 (average threshold) = 60.
62. 2.
63. Note that there are six distinct degrees of centrality in a 5 x 5 lattice. Additional simulations indicate that centrality of the first mover is monotonically related to the average number of treaties signed in equilibrium.
64. 2 ≈ .56. The proportion of treaties signed in Figure 12 reaches a maximum of approximately .5, which means that if the first mover were large and signed a treaty with at least one other state in the first round, subsequently 90 percent of potential treaties would be signed (on average).
65. Note that this increases the number of potential treaties from forty to seventy-two; the analysis below, of course, examines the proportion of potential treaties that are signed.
66. If the initial actor to sign a treaty is in the corner, the analogous numbers are 29 percent and 69 percent, respectively.
67. p, where p is the number of treaty-eligible neighbors the first mover has. Thus, for δ = 3, in the highly connected scenario (p = 8), this is 3.9 percent; in the less connected scenario (p = 4) this is 20 percent; in the totally connected scenario (p = 24), .006 percent.
68. Note this is different from the preceding assumptions regarding interconnectedness. The reason for this last assumption was that this way all actors in the system have the same level of interactions, thus eliminating geographic centrality as a factor in determining centrality in the network of treaties.
69. 24 x 1000 = 80), and 1 treaty once.
70. ij. Thus, notably, the more interconnected the world (the larger M), the more robust the equilibrium where every state has signed a treaty with every other state.
71. kl (drawn from between 0 and 10) - (2 x 22), which would be between -34 and -44.
72. For a perceptive discussion of the MFN network of treaties from 1860 to 1929, see Douglas Irwin, "Multilateral and Bilateral Trade Policies," in Jaime de Melo and Arvind Panagariya, eds., New Dimensions in Regional Integration (Cambridge: Cambridge University Press, 1993).
73. David Landes, "Technological Change and Development in Western Europe, 1750-1914," in J. H. Clapham, ed., The Cambridge Economic History of Europe: The Industrial Revolution and After, pt. 1 (Cambridge: Cambridge University Press, 1965), 363.
74. Ibid., 450.
75. Ibid., 429.
76. See Ernest Bogart, Economic History of Europe, 1760-1939 (London: Longmans, Green, 1942), 109, 118.
77. Per Bak and K. Chen, "Self-Organizing Criticality," Scientific American 264 (January 1991).
78. Lord Napier, British ambassador to Berlin, to Lord Russell, British foreign secretary, March 24, 1865; originally cited in Peter Marsh, Bargaining on Europe: Britain and the First Approach to a European Economic Community, 1860-1892 (New Haven: Yale University Press, forthcoming), chap. 3.
79. An important antecedent condition to this treaty was the general increase in power of Napoleon III and a French constitution that gave the executive (Napoleon III) power to set tariffs in treaties that did not require ratification by the legislature. This institutional setting of executive autonomy determined what Nelson labeled the "supply" conditions of protection and would be exogenous in the model above; see Douglas Nelson, "Endogenous Tariff Theory: A Critical Survey," American Journal of Political Science 32 (August 1988). A second factor that increased Napoleon's desire to strike a deal with Britain was his aim to acquire Britain's cooperation with respect to his objectives in Italy. See: McKeown (fn. 4);
80. and Barrie M. Ratcliffe, "The Origins of the Anglo-French Commercial Treaty: A Reassessment," in Ratcliffe, ed., Great Britain and Her World, 1759-1914: Essays in Honour of W. O. Henderson (Manchester: Manchester University Press, 1975). As noted above, for each dyad there will be a variety of idiosyncratic factors that affect the tendency of that pair to sign a treaty.
81. Arthur Louis Dunham, Anglo-French Treaty of Commerce of 1860 (Norwood: Plimpton Press, 1930).
82. Max Schippel, Grundzuge der Handelspolitik (Berlin: Akademischer Verlag für sociale Wissenschaften, 1902), 171, as cited in Ashley (fn. 21), 32.
83. Paul Bairoch, "European Trade Policy, 1815-1914," in J. H. Clapham et al., The Cambridge Economic History of Europe (Cambridge: Cambridge University Press, 1989).
84. More than a third of Belgian exports went to France at this time - 162m francs out of total exports of 470m francs; see Mitchell (1975), 489, 506. It exported about as much to France as to its next two largest trading partners combined; e.g., in 1860 its exports to France were valued at 162m francs, and to Germany and the U.K., at 169m francs.
85. Ashley (fn. 21), 32.
86. Memo, Joseph Crowe (consul-general for the Kingdom of Lower Saxony) to Lord Russell, May 15, 1861, as originally cited in Marsh (fn. 49), chap. 3.
87. Ivo Nikolai Lambi, Free Trade and Protection in Germany, 1869-1879 (Wiesbaden: Franz Steiner, 1963), 35.
88. Rudolf von Delbrück, Lebenserinnerungen, 1817-1867, vol. 2 (Leipzig: Duncker und Humblot, 1905), 201-3, as cited in Lambi (fn. 57), 5, emphasis added.
89. Bairoch (fn. 53), 40; see also Figure 15.
90. This period was chosen because many of the treaties stated that they would come up for renewal in ten to twelve years, and the data on the renewal of particular treaties are incomplete. It is at least possible to say with some reliability that the treaties captured in Figure 15 were actually in force during this time.
91. On this point, see also Arthur Stein, "The Hegemon's Dilemma: Great Britain, the United States and the International Economic Order," International Organization 38 (Spring 1984). The four states with which both Britain and France signed treaties were Germany/Zollverein, Italy, Belgium, and Austria-Hungary. The last was the one state that Britain signed a treaty with first. The four states with which France signed treaties during this period and with which Britain did not were Spain, Norway, Sweden, Switzerland, and the Netherlands.
92. Carl Johannes Fuchs, The Trade Policy of Great Britain and Her Colonies since 1860, trans. Constance H. M. Archibald (London: Macmillan, 1905), 76.
93. Of course, this is less puzzling if one views Britain as the benevolent hegemon rather than as an exploitative hegemon; see Duncan Snidal, "The Limits of Hegemonic Stability Theory," International Organization 39 (Autumn 1985). One might hypothesize that Britain encouraged other states to sign treaties as part of its effort to decrease trade barriers in the international system. There is no evidence to support this hypothesis, and some that contradicts it, e.g., Fuchs (fn. 62); and Marsh (fn 49).
94. Of course, this is less puzzling if one views Britain as the benevolent hegemon rather than as an exploitative hegemon; see Duncan Snidal, "The Limits of Hegemonic Stability Theory," International Organization 39 (Autumn 1985). One might hypothesize that Britain encouraged other states to sign treaties as part of its effort to decrease trade barriers in the international system. There is no evidence to support this hypothesis, and some that contradicts it, e.g., Fuchs (fn. 62); and Marsh (fn 49).
95. Of course, this is less puzzling if one views Britain as the benevolent hegemon rather than as an exploitative hegemon; see Duncan Snidal, "The Limits of Hegemonic Stability Theory," International Organization 39 (Autumn 1985). One might hypothesize that Britain encouraged other states to sign treaties as part of its effort to decrease trade barriers in the international system. There is no evidence to support this hypothesis, and some that contradicts it, e.g., Fuchs (fn. 62); and Marsh (fn 49).
96. Fuchs (fn. 62), 29.
97. Marsh (fn. 49), chap. 2.
98. Ibid., chap. 3.
99. Ibid.
100. Ibid.
101. Landes (fn. 44), 440.
102. Thus, for example: "The particular blend of worsted wear in which Bradford specialized included warps of cotton, which remained cheaper than wool, to produce a hard and lustrous cloth which went well over the crinolines of the day, better than the more expensive all-woolen worsteds in which the French specialized"; Marsh (fn. 49), chap. 3.
103. Dunham (fn. 51), 88.
104. Fuchs (fn. 62), 31-32.
105. Ibid., 59.
106. Ibid., 30-31.
107. Irwin (fn. 43).
108. Fuchs (fn. 62), 64.
109. Ibid., 65.
110. Ibid., 66.
111. Ibid., 70.
112. Irwin (fn. 43), 105.
113. Note that these levels were significantly higher than pre-World War I levels.
114. Frank A. Haight, A History of French Commercial Policies (New York: Macmillan, 1941).
115. There are, of course, other processes at work that might confound contagion. For example, in the case of the EC/EU, members at any given time will need to evaluate the policy preferences of potential members. If those preferences differ substantially from those of current members, current members may delay membership of potential members until those differences matter less. See George Downs, David Rocke, and Peter Barsoom, "Managing the Evolution of Multilateralism," International Organization 52 (Spring 1998). Also, since the EU allows free movement of factors, some potential members raise the possibility of large (and politically costly to current members) migrations to current EU members. The EU has developed "second class" citizenship for Turkey and many of the countries in Central Europe, offering, that is, much of the access to goods but not to people. From a research design perspective, the system of bilateral treaties conveniently eliminates some of the messiness involved in the process of adhesion to multilateral PTAs.
116. See also Yi (fn. 23).
117. For an intriguing analysis of the Zollverein and other multilateral PTAs, see also Walter Mattli, The Logic of Regional Integration: Europe and Beyond (Cambridge: Cambridge University Press, 1999). Mattli's argument is that (1) customs unions represent an attempt to internalize externalities that cross borders within the customs union; and (2) decreased transportation costs increase externalities across borders (increasing the payoffs to a customs union) and decrease the costs of administering a larger geographic unit.
118. John Bowring, Report on the Prussian Commercial Union (London: W. Clowes, 1840), 33-34, as cited in Ashley (fn. 21), 11.
119. Bowring (fn. 86), 37, as cited in Ashley (fn. 21), 11.
120. William Otto Henderson, The Zollverein (London: Frank Cass, 1984), 107.
121. Ibid., 103-49.
122. Andrew Moravcsik, "Negotiating the Single European Act: National Interests and Conventional Statecraft in the European Community," International Organization 45 (Winter 1991).
123. Maria Green Cowles, "Setting the Agenda for a New Europe: The ERT and EC, 1992," Journal of Common Market Studies 33 (December 1995), 507.
124. Organization for Economic Cooperation and Development, Regionalism and Its Place in the Multilateral Trading System (Paris: OECD, 1996), 76.
125. Baldwin (fn. 6), 489.
126. Karl-Orfeo Fioretos, "The Anatomy of Autonomy: Interdependence, Domestic Balances of Power, and European Integration," Review of International Studies 23 (July 1997), 313-14.
127. Oye (fn. 6), 164. Note that customs unions also have the analytically distinct property that because there is a common exterior tariff, the collective might be able to reap gains through the imposition of an optimal tariff. Further, it is clear that at least in the case of the EC, a major objective of members was to allow EC firms to achieve economies of scale that would allow them to compete with U.S. firms; see Bela Balassa, The Theory of Economic Integration (Homewood, Il.: Richard Irwin, 1961).
128. Oye (fn. 6), 164. Note that customs unions also have the analytically distinct property that because there is a common exterior tariff, the collective might be able to reap gains through the imposition of an optimal tariff. Further, it is clear that at least in the case of the EC, a major objective of members was to allow EC firms to achieve economies of scale that would allow them to compete with U.S. firms; see Bela Balassa, The Theory of Economic Integration (Homewood, Il.: Richard Irwin, 1961).
129. Robert Z. Lawrence, Regionalism, Multilateralism, and Deeper Integration (Washington, D.C.: Brookings Institution, 1996), 77.
130. Yeats finds that trade within Mercosur has grown fastest in those products that do not have a comparative advantage and concludes that Mercosur is therefore trade diverting; see Alexander Yeats, Does Mercosur's Trade Performance Raise Concerns about the Effects of Regional Trade Arrangements, Policy Research Working Paper, no. 1729 (Washington, D.C.: World Bank, 1997).
131. Yi finds that if agreements are open to new members, trade blocs will snowball so that eventually all states will belong to one PTA (i.e., there will be multilateral free trade); see Yi (fn. 23).
132. Oran Young, "Regime Dynamics: The Rise and Fall of International Regimes," in Stephen Krasner, ed., International Regimes (Ithaca, N.Y.: Cornell University Press 1983).
133. Ibid., 99.