Can Trade Be A Weapon Of Global Power?

Interactive Transcript

spk_0 I'm Viola Zuba.

spk_0 I'm Anthony Feller.

spk_0 I'm Ethan Buenardemisquita and this is not another politics podcast.

spk_0 Most of us, other than Anthony, I guess, came of age in a world where free trade and

spk_0 the like was the background, the background ideology of like politics and everybody who's

spk_0 talking about trading freely and interdependence among countries, etc. scholars of international

spk_0 political economy and the like have been talking for a long time about the use of trade relations

spk_0 and economic relations among the states as part of the broader geopolitics and exercise

spk_0 of power and the like.

spk_0 But those issues of the idea of using trade relations, using industrial policy, using

spk_0 tariffs, subsidies and the like, as part of not just economic policy but power politics

spk_0 among the states, the ways in which states make their world in the way in the international

spk_0 order, not just to think about the economic consequences for their citizens, but to think

spk_0 about the exercise of state power, has obviously come to the fore as the sort of post-war global order

spk_0 that sustained the quasi-free trade regimes and the like that we lived with for a long time.

spk_0 It seems to be coming undone in lots of ways that the new sets of thoughts among political leaders

spk_0 in domestic politics and lots of countries are turning to the use of economic policy as a form

spk_0 of state action and I think trying to make sense of that is really important for understanding

spk_0 modern politics and we've got to use our modern tools of social science to try and make sense of

spk_0 that. Anthony, what do you think?

spk_0 I think a lot of academics have probably had this relatively naive view, maybe myself included,

spk_0 that like, oh, you know, a major leader of an OECD country would never do anything too crazy

spk_0 in the area of free trade because they would just be screwing themselves over in the process

spk_0 and maybe Trump and others are proving that theory wrong and saying, no, it is worthwhile to flex our

spk_0 muscle in this area of trade in different ways. And so it'd be useful to think about like in what way

spk_0 would a leader want to do that and when would it be right, when would it make sense, when it would

spk_0 not make sense and so forth? Viola, you spoke with someone who has something to say about that.

spk_0 Yes, I spoke to David Young from Harvard University about his paper called International Power.

spk_0 As the name suggests, in this paper David and Ernst tried to ask this question,

spk_0 if we think that trade relationships indeed allow countries to exert power over other countries,

spk_0 how should we think about what aspects of this trade give countries power?

spk_0 And how should we also think about how countries might do in order to increase their power for future

spk_0 negotiations?

spk_0 We are talking about nine months into President Trump presidency. One of his signature policies

spk_0 is tariffs, trade policy. The response to this policy from economists was almost universal

spk_0 and negative because I think we all remember our international trade course where we were told

spk_0 removing trade barriers is beneficial to all countries. Your paper adds some new ones to this

spk_0 classical thinking about the benefits from trade and the benefits from removing trade times.

spk_0 So what you do first is we build a model trying to understand exactly which aspects of trade

spk_0 increase trade-related power. Can you walk me through the basic logic of your model and what are

spk_0 the determinants of international power? So think about the idea of between two countries.

spk_0 So the model environment is such that in any period, if the two countries sort of

spk_0 relationship becomes sort of tense, then one country can unilaterally use that as a moment

spk_0 to generate trade disruptions to potentially squeeze some geopolitical rates from you.

spk_0 I can basically take any sectors either in port or export to unilaterally disrupt that.

spk_0 And of course, you can also retaliate whenever one of the generally that starts.

spk_0 The symmetry of the damage that we can do to each other is going to determine how much leverage

spk_0 that I can have over you. And it's not just the size that matter, it's the symmetry that matters

spk_0 because I need to anticipate how much more I mean biting the retaliation. But also the adjustment

spk_0 costs, the degree of substitution, the elasticity substitution that my threats is in garment

spk_0 sector versus in semiconductor that's going to make a very big difference. This is what's going

spk_0 to what's what we will cause of international power. The reason why we call that international

spk_0 power is that this is going to the shadow cost of us not engaging entry into actual disputes.

spk_0 Okay, so I want to get a little bit more clarity on what exactly determines whether I have

spk_0 an upper hand. So, you know, in general, we trade many goods and it's not that one country is

spk_0 some different various different values goods and sometimes the same good. So, in your model,

spk_0 you assume that if I trade with you and I want to get some concession from you, I'm going to

spk_0 threaten you by withdrawing my exports. Why do I threaten you by withdrawing my exports and not

spk_0 my imports? And two, you assume that when I withdraw my exports, I hurt you, but I'm not hurting

spk_0 my own domestic producers. As you know, there is this symmetry from export

spk_0 threats versus import threat, but in fact, that's an outcome of the model. So, in fact,

spk_0 we, the model will let you threat either on export or import threat. So, the threat part is

spk_0 asymmetric. Now, it turns out that the export threats, the damage it would do to you,

spk_0 right? Due to me, that would generate the more first order sort of damage rather than import

spk_0 threat. If I threat not sell something to you, if the thing I'm threat to not sell to you has not

spk_0 been produced, then I don't need to produce that. I'm going to save the cost of intermediate

spk_0 production. I'm not going to incur the full loss of the of the of the rendering that I could have

spk_0 got. So, the loss on my side is is is is is is second order from that perspective and you lose the

spk_0 whole thing that you could have consumed from me. If the thing has already been produced, I'm not

spk_0 selling to you. You as an importer is going to suffer still from lack of consumption. But I

spk_0 mean as an exporter, I'm going to be forced to consume this domestically. I'm going to be already

spk_0 at the margin, sort of not indifferent between import as sort of consuming domestically versus

spk_0 exporting. So, that's on the margins going to generate a second order damage to me. Of course,

spk_0 if we're talking about sort of 50% of my domestic consumption that would have been exported to you,

spk_0 that's going to generate a bigger head to to me. But that's still going to be in the in the

spk_0 in the realm of of second order damage. Compared to you're going to swallow everything that you

spk_0 could have consumed that you didn't get as an importer. With the adjustment of the the

spk_0 elasticity to substitution, how easy are you to source it from elsewhere? So, that's the key

spk_0 intuition. And hence sort of the import that is going to be more damaging to me because I'm not

spk_0 getting any consumption out of it and you as a as a exporter, actually, I'm not going to hurt

spk_0 as much either to avoid all the production costs or you're just forced to do this domestically.

spk_0 So, that asymmetry was coming out of the model even though the action itself was not symmetric

spk_0 to begin with. And we actually, so then take it to the data to see we can measure your export power.

spk_0 It turns out export power is a small first order, but we can measure your export power. And we

spk_0 have a natural measure your import power and see which one of them is actually more meaningful

spk_0 to generating sort of political geopolitical engagement, which is our key measure for the

spk_0 consequences of such power. And it turns out the export dependence is just much more

spk_0 much more meaningful, much more clinical useful to bring you to the bargaining table as a stress

spk_0 that's consistent with with the model suggests. So, that might be explaining the fallacy of

spk_0 Germany's thinking. Germany was importing a lot of crude oil from Russia and the thinking was

spk_0 that Russia would be worried about Germany's stopping that import. And what you're saying is

spk_0 actually the exporter is the one who is less worried than the importer. It should be less worried.

spk_0 Right. So, to some extent, it's also sort of mirroring the flavor of China's sort of

spk_0 threat of banning real earth. It's much more painful from the importer's perspective than for

spk_0 example, importer's side said we're not buying goods from China. Of course, when the magnitude

spk_0 scales up, we're talking about if China has the shut down 50% of the production, if the US

spk_0 is not buying, then the second order effects are still sort of minimally large, but it's still

spk_0 going to be much less sort of hatred in a much softer way than the export ban.

spk_0 Yeah. You know, the story in your model is that you might want to readjust your bilateral traits.

spk_0 In case you anticipate that there are some consertions that you might want from the other country.

spk_0 In your paper, you've discussed that if the probability that you might grant me some

spk_0 consertions that you might have this ability, so for example, we might enter in more disputes in

spk_0 the future than in the past. So, if the probability that we're going to enter in those disputes

spk_0 increases, I should try to increase my trade-related power. But of course, the other country is

spk_0 going to try to do that. So, in the paper, you say one way to do that is to shape our trade by

spk_0 using subsidies for export and tariffs for import. So, what I would like you to walk me through is,

spk_0 you know, suppose that you and I are trading and suddenly we realize we are going to have more

spk_0 disputes in the future. Who is using tariffs? Who is using subsidies? And can we say anything about

spk_0 what's the end effect? Like, isn't that we are just imposing tariffs of subsidies, trade

spk_0 suffers, but the power, the relative power stays the same? Or can you make any predictions about

spk_0 who is the one who is actually going to invest more? Invest in gaining power. Right. So, there is

spk_0 this tension that while we predict when you anticipate changes in geopolitical alignment,

spk_0 you're going to adjust your trade-rich with another country so that you want to enter into the

spk_0 potential disputes with a better precision. But both sides are doing so. So, the net effect is

spk_0 it's ambiguous. It depends on what leverage you have in the beginning and what's the cost of

spk_0 adjusting and so on. So, empirically, the test is actually going to be somewhat difficult in part

spk_0 because because theoretically it's ambiguous exactly what direction you're going for.

spk_0 So, can I stop you here? So, first maybe walk me through. So, suppose we both want to raise our

spk_0 power now. Do I increase my expertise in import tariffs or do I only use one of those tools?

spk_0 Yeah. So, there are actually two layers on that. One is that there's already a complication of both

spk_0 sides can do both things. And then, the question of one side can do many, many things. All the

spk_0 branches from tariffs to domestic industrial policies of all sorts to basically increase my

spk_0 so if if I increase my relative export power to you is objective, there are many things I can do

spk_0 unilateral to achieve so. I can increase my export towards you. I can decrease my import from you

spk_0 to decrease your export power to me because in the end, it's a symmetry that that matters. So,

spk_0 I can do all these things. So, what we find in the paper is that first we'll find that the

spk_0 context where we think we can isolate one country's action because there's this challenge of

spk_0 if both countries are acting, we don't know what's the net effect. So, we're first want to see

spk_0 can we find a context where it's plausible that only one country of the pair is is primarily acting.

spk_0 And then, we can see among that country the who is acting, what is the trade adjustment on net?

spk_0 And then, we can decompose what's our country doing more on import from or on export from.

spk_0 So, it turns out in our context, we find that there are more adjustment on the import front.

spk_0 If I want to increase so when the geopolitical tension between two countries rises and if

spk_0 let's assume for a second that we're forcing one of the country cannot act, okay? The only one

spk_0 side that can act, that country can do two things. I want to overall increase my export power towards

spk_0 you. That means I need to increase my our asymmetric export dependence towards you. I can achieve

spk_0 that in two ways. I can make you more depend on me in my export or I can make me less depend on

spk_0 import from you. Interesting. Okay, so then you take your model to the data. So, the first thing

spk_0 that you do is you just calculate this measure of trade related international power for various

spk_0 countries. And you have this fascinating figure, first for the US and then for China, they

spk_0 are trade related power relative to the rest of the world. What's surprised you most in this

spk_0 figure? What do you think are the most surprising and most interesting findings that come out of that?

spk_0 You might think that what we hope to measure here is simply reflecting country's size in terms of GDP

spk_0 or total trade volume. So, the maps that you see is conditioning on the country's size,

spk_0 conditioning on the total trade volume. So, the dependence actually there's a lot more nuanced

spk_0 variation dependence that end up being quite meaningful. That's not captured by the very

spk_0 aggregative size measures. That's sort of in some sense quite surprising to me. And two is that

spk_0 you do see a lot of patterns for gravity here. The US have a lot more power exposure towards

spk_0 countries that are in the nearby region in South America and in Europe. Places where the US

spk_0 are trading, ultimately this after all is still a trade related to trade. So, it reflects trade

spk_0 relationships. So, those are the zones of US exposure dependence, which look markedly different

spk_0 from China's sort of distribution where China's dependence is more diffused, reflecting in China's

spk_0 global trade footprint. What I find particularly interesting from from back comparison is that

spk_0 there are areas in which the US and China have overlapping influence. Latin America is example where

spk_0 both US and China has has more trade power over. And there are places where one of the two

spk_0 countries are dominating. And Europe is example relative to North America relative to Africa,

spk_0 for example, or Asia. It's a neither country had that much power over. That's reflecting the

spk_0 Europe size. Yeah, what I found interesting in addition was that China has more power over the US.

spk_0 And also that if you think about maybe this should be surprising, but when you think about power,

spk_0 it sort of makes you pause that US seems to have more power over its allies than over its

spk_0 adversaries. That was also quite interesting. Right. And there's a Trident Act problem of a lot of

spk_0 the trade was more established and more in greater volume among geopolitical sort of friends

spk_0 to be with. And that's really sort of the paradox of that encouragement to bring up. The more your

spk_0 trade was one other, the more efficiency again, you can generate, but also it means that you're

spk_0 leaving leverages to the other side. In this case, but if you're trading more with your allies,

spk_0 your allies are also much more exposed to potential leverages. So the entire story of your model

spk_0 is that I might want to build international power in order to get more concessions. Assuming that I

spk_0 do not try to extract any concessions unless they are of significant size because there's some cost

spk_0 of engaging in those negotiations, your model then predicts that if I have power advantage over

spk_0 you, I'm more likely to try to get those concessions. So you're going to see more negotiations or

spk_0 like more sort of announcements of these kind of concessions in the data. You look at the data and

spk_0 what do you find? We first would take the measure of the asymmetric

spk_0 export dependence just for elasticity. That's the power measure at the country paired by year

spk_0 level. So we see the fluctuation of that. And then we ask the question, does that fluctuation

spk_0 can predict in a subsequent period more or less engagement, bilateral geopolitical engagement

spk_0 between the country? Most of the engagement has anything to with trade per se. These are just

spk_0 negotiation between ministers or even at the presidential level. And we find that as the power

spk_0 sort of fluctuates between the two countries, when asymmetric increases so that the shadow cause

spk_0 of not coming to the bargaining table increases because the stress of trade and disruption arises

spk_0 in terms of the damage it can generate, it substantially increases the likelihood that the two

spk_0 countries come to either bargaining table or some sort of engagement or issue sort of a plea for

spk_0 engagement or the co-stition of any sort. And all these engagement that we're looking at are

spk_0 explicitly not in a violent front. These are not sort of in a war engagement. These are

spk_0 chronicle peaceful engagement that's meant to potentially solve some preexisting

spk_0 conflicts or preexisting to the disagreement. So you do find some evidence that

spk_0 this trade related international power indeed seems to result in concessions. You can't observe

spk_0 the concessions so you can't measure them quite well because as you said they are not necessarily

spk_0 measured in dollars but you say you can observe just the instances where presumably some concession

spk_0 was being granted. So that's super interesting. Yeah, ex-entee there's many reasons to think that

spk_0 there would be no relationship between these trade trade. After we're talking about stress of trade,

spk_0 these are not realized sanctions. So there's many reasons to think that this threat so these

spk_0 things might be too subtle and then break down and then the negotiation may not realize.

spk_0 So we find it pretty remarkable that we actually can't see this. The caveat as you mentioned is that

spk_0 these are instances of engagement and negotiation. It does not mean improvement in outcome

spk_0 or worsening of the outcome because to do that we will need to know what is the ex-entee

spk_0 status quo arrangement before the negotiation occurred. That's just going to be very,

spk_0 very difficult to measure it periodically and then we have not found a way to do so.

spk_0 I guess sometimes you all know, observe that let's say the heads of the states have met but you

spk_0 don't even know what they were discussing about. So like you don't even know whether there was

spk_0 any discussion about any concessions but the presumption is given that it's costly to meet and

spk_0 those are usually very well thought out events. The presumptions if they are meeting then there's

spk_0 something that they are discussing and that might be some concession. So that's super interesting

spk_0 when we suddenly anticipate having more disputes in the future or like opportunities for disputes

spk_0 we both have incentives to invest in our power and the predictions of the model are ambiguous about

spk_0 who is going to gain more power. So it's actually hard to take this prediction to the data. You

spk_0 manage to take it to the data. So can you walk me through what you do and what you find?

spk_0 First, we will need a measurement of our geopolitical alignment and that it duly

spk_0 sort of a measurement that is high frequency enough so there are fluctuations that we can export.

spk_0 So the typical sort of measurement that the literature uses such as sort of autocracy, democracy

spk_0 sort of alignment as a force for geopolitical alignment which is extremely

spk_0 pructive of many outcomes is less useful here because those things are very very stable over time.

spk_0 Even the UN vote share, even the UN vote agreement which many of the parts of the literature

spk_0 have uses are fairly stable over time and then we really would like to get something that's

spk_0 high frequency. So we build a such a measure that very yearly and so to give you a quick

spk_0 measure of how we do so is that we take the autocracy democracy or party scored this

spk_0 with some institutional differences to anchor quite sessional differences that the country have over

spk_0 each other. Don't vary over time but there are very meaningful cross-section differences

spk_0 and then we take the over time frustration in general opinion polls that how countries view

spk_0 each other as a reflection of how far or how close the country are getting which oftentimes they're

spk_0 under the cross-section differences for those poor measures are not, but the fluctuation is

spk_0 extremely, is extremely sort of a meaningful. So we'll map that into the into the into the over time

spk_0 and then we'll have this sort of bilateral yearly geopolitical alignment. So that's the measurement

spk_0 part and then we need the empirical strategy to isolate sort of ideally just one country's responses

spk_0 and let the other country not acting. We're going to take the the the the context of if one country

spk_0 and ideally sort of this shifts in geopolitical alignment is also something that's very

spk_0 historically without so much anticipation for the country who are responding to it. So there are

spk_0 multiple challenges. So the way we we do so is that we're going to take so take two countries again

spk_0 country A and country B. If country A had a domestic election that in that generated a close

spk_0 election with a partisan turnover many policy would have changed as a result of that and including

spk_0 sort of the country's diplomatic policy. And we want to take the changes where countries other

spk_0 country country B's who were being on the upward trajectory of getting closer to this country

spk_0 because the country A's domestic political turnover will have a trend break going in the other

spk_0 direction to the grouping of the rest of the world because because of your country's domestic

spk_0 diplomatic policy change. So the complete example of this is that when the US gets sort of a

spk_0 partisan turnover from Obama to Trump, the US is getting closer to to to to Russia and then

spk_0 away from from from Europe. You see a trend break in relative to previous alignment changes and

spk_0 when we're looking at other country who did not have domestic election responding to that

spk_0 country's domestic election and then corresponding sort of changes in alignment and how they're going

spk_0 to adjust their adjusted credit relationship. The assumption here is that it's going to be easier

spk_0 for country B's to unilaterally change policy towards country A because I'm only dealing with

spk_0 one country and now I will target my policy towards that one country to adjust my my my my my my

spk_0 power relationship anticipating our our future to do for alignment but for country A who just

spk_0 had a domestic turnover and all my domain as sort of no foreign sort of alignment has reshuffled

spk_0 according to that turnover. I would have to have policy that simultaneously change across

spk_0 200 of them to be aligned with these changes. So it's going to be just much harder for the country

spk_0 to do a country A's to do so. This will allow us to to isolate so what's happening in country B.

spk_0 And in fact, so in purview we find that there's very little changes on average with country A

spk_0 who had domestic close election policy towards other countries even corresponding to the

spk_0 to the geographical alignment because just you know there are too many countries to change at the

spk_0 same time. But country B's were were the primary drivers of such change. So when you say very few

spk_0 changes in country A and changes in country B, what are you talking about are you talking about

spk_0 we see a little changes in the trade policy of country A or we see you know because everything

spk_0 is effective country B is changing its policy VGA and then the export of A and then import of

spk_0 A changes to so can you just give me a little bit more details about what we're doing there.

spk_0 We're very close. So so what we find is that the the first result we document is that as countries

spk_0 are pulling apart because country A had a domestic political turnover and then the the based on

spk_0 the previous sort of a lament structure it structures reversed and then if we're pulling apart

spk_0 because of that then the in a subsequent period of over the next course of next two to three years

spk_0 the power exposure that country B had towards country A increases. The country B is increasing

spk_0 its power changing its trade relative towards country A in in responding to that. That's changing

spk_0 in actual trade and changing in in in in in in in in in in in in a power measure itself.

spk_0 Therefore subset of the countries and for subset of the years in our in our overall sample period

spk_0 we can match all the countries to the export and import policies and then we can ask

spk_0 who has then changed the CA jump in in in in in in more restrictive or more liberal trade policies

spk_0 on either side and this is where we'll find that country A actually don't seem changing the policy

spk_0 that's to be for. And the country be where the primary sort of

spk_0 of places where where policy seems to have have changed. And this

spk_0 is also the place where we see along with the with the decomposition of power

spk_0 that much of the changes coming from country B is adjusting is diverting

spk_0 away their import. A rather than sort of that that we saw is is is is the

spk_0 more sort of defensive measure rather than I'm I'm trying to increase

spk_0 export towards country A when we would when we would become more

spk_0 misaligned as a more offensive measure because so potentially increasing

spk_0 export towards you is is more expensive but I can I can shift my import away

spk_0 from you to other countries by by reducing your trade power toward

spk_0 export power towards me and that's more a readily less costly action and we see

spk_0 both the policy and the trade volume from consistent evidence on on that.

spk_0 And but as we know so our model don't have a strong prediction

spk_0 because we don't have a we don't put a cost on on on the policy structure but

spk_0 but we find this this this this is better.

spk_0 Okay so we have to go back to President Trump.

spk_0 You know having worked through this paper and thinking very carefully about

spk_0 what it says and what it doesn't say. Do you feel like you have a more nuanced

spk_0 view of President Trump's tariffs and you know do you think

spk_0 you know I'm not I'm not asking you to think about what's the true motivation of

spk_0 President Trump but do you think there might be something into what we're

spk_0 doing right now trying to increase our export and decrease our import from

spk_0 countries who might be our adversaries. So setting aside the question of what's

spk_0 only equilibrium was awfully equilibrium what Trump did was actual tariffs or

spk_0 stress of tariffs and was a commemorative setting all that question aside.

spk_0 If you take what Trump did sort of in the in the lens of the model to say

spk_0 he used the tariff this is like vocally voiced the threat okay let's assume those are

spk_0 actually not sanctions but the stress of sanctions that would have been reverted and

spk_0 then it was not not happening and then those threats were inducing

spk_0 opportunities for bargaining for negotiation. In Trump's case it's oftentimes in the in the trade

spk_0 from but I but Trump could have used this for any other things and the country do come to

spk_0 bargain table. So in that sense like sort of no this is very much aligned with what we

spk_0 predict that should not be the highlights or the making salient those those those those

spk_0 those trade disruption that would have cost the stress of that would induce more engagement more

spk_0 more negotiations and so on. Now it's a separate question of you know there's a

spk_0 fine line between realizing that threats and and and and so you know and there's a temporal

spk_0 component to it where Trump go back and forth with it which none of that was was in

spk_0 in in in in our model but the fact that sort of no you can use sort of the threats of trade

spk_0 disruption to champion negotiation that I think very much is is is is is aligned with with what we

spk_0 what we predicted even though sort of when we start working on this we did not anticipate sort

spk_0 of the Trump action. I remember that's true because I saw this paper I think before the election

spk_0 so so that's true but you know I was thinking about this slightly differently I wasn't thinking

spk_0 about President Trump using threats of tariffs to get concessions currently so big of the equilibrium

spk_0 path near model but I was thinking more about as big right now in the process in which the United

spk_0 States is trying to shape its international power so we are using threats of tariffs tariffs

spk_0 other kind of threats not to get other concessions at the moment but to reshape our bilateral trade

spk_0 balances in order to have more leverage in the future and this is reflected a little bit in the

spk_0 rhetoric that's associated with that that you know we've been taking advantage of

spk_0 and we have to be powerful I mean to some extent we've been taking advantage of is about the

spk_0 economic side but you can think about this as hey we are not in a good position right now if we

spk_0 if it came to war or some international dispute we are not in the great position we have to

spk_0 use all the tools available to put ourselves in a better position so so so there are several things

spk_0 I want to mention so one is that relative to the total trade volume of the US or relative to the

spk_0 total GDP size of the country which US obviously is largest in in in the world the trade power as it is

spk_0 as of 2022 as our as our measure US underperforms relative to what you would predict so the size of the

spk_0 country would exercise China on the other hand so from the overperforms our performance relative to

spk_0 the size you so you would anticipate sort of China being a large country will be very powerful

spk_0 or all others but in a trade domain China's blow even above its weight relative to the US is

spk_0 underperforming well wouldn't call it just the fireball but maybe expected position of power where

spk_0 US think it should be and and given sort of the trade power the US will generate in in the in the

spk_0 south of the north that the sense of of the trade dependence that that that we're talking about

spk_0 in our paper the US is not in a good position and there is a notion that with with trade

spk_0 management the US can potentially increase that power exposure with with the industry the

spk_0 second thought I have on this is that every time one uses a substrates to China to actually

spk_0 generate a major concession especially so the religion to threats you will have other country

spk_0 real adjusting and the potential is in the future undermine your power should the best so the

spk_0 example of this would be in 2010 after China's sort of actual ban or export of real earth to

spk_0 Japan because of the WIW and disputes Japan very much reduces the dependence of real earth from

spk_0 China over the subsequent decade and so so so so the trade power exposure the China has over

spk_0 over Japan at least in those sectors are substantially reduced and because because Japan's real

spk_0 adjustment so so one also needs to think of through very carefully in the dodging responses

spk_0 due to the anticipation of future disputes due to anticipation of of of of of all

spk_0 realization of of geopolitical misalignment as we see how other countries are also adjusting

spk_0 and the probably can can can can under my the the unilateral adjustment that US are actually

spk_0 trying to do in this case

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spk_0 so I thought you know I thought you had you asked a very good question in the interview

spk_0 and I'm not sure I was convinced by his answer so maybe I want to give us a chance to read read

spk_0 readdress that was basically along the lines of like why why is there this this asymmetry why is it

spk_0 on the one hand if I if I don't sell to you I'm of course hurting you especially if you can't buy

spk_0 what you want to buy from someone else but I'm also hurting myself and David says well the

spk_0 yes that's true but you're not hurting yourself by that much because you just don't have to produce

spk_0 that thing anymore and that kind of makes sense in a cartoonish view of the world where like I'm a

spk_0 unitary actor and I make all the stuff and I sell it and I have lots of things I'm doing but

spk_0 if I'm a political leader by not by choosing not to sell something to another country I'm screwing

spk_0 over a bunch of my citizens and constituents who who have dedicated their lives to producing that

spk_0 product and so I don't know if that maybe maybe by simplifying things too much he's missing

spk_0 some interesting aspect of the politics here I'm just curious were you satisfied by that answer

spk_0 and do you think do you buy the story that there is this built-in asymmetry yes and no I see where

spk_0 this prediction is coming from hebians really like the the simplest model you would build if you

spk_0 just were to build the first model of this sort and basically the assumption is that if you know I

spk_0 I engage in production on the after I know that I'll be able to export goods and if I know I

spk_0 cannot export those goods I'm not going to engage in production so I can just shift my resources

spk_0 to some other uses and you know it's going to be it wouldn't be a satisfying political statement to

spk_0 say you know we're we're no longer going to export to China or whoever's buying your stuff but

spk_0 but don't worry you know how all this extra leisure time you don't have to you don't have to work

spk_0 anymore like all the manufacturers I mean in particular if you think they're sort of like

spk_0 asset specificity in the in the fixed cost of production and so you have what sure you you build

spk_0 the semiconductor factory and you cannot quickly pivot from making semiconductors to making car seats

spk_0 in your in your semiconductor factory and so exactly oh you know if if the market structure is such

spk_0 that this activity we're engaging it was extremely profitable and then engaging some other activity

spk_0 for example profits which I think is is it would be a realistic assumption when we think about

spk_0 we know when we think about suddenly Conan would be able to export you know pork to the United States

spk_0 you think about the big chunk of population that loses their livelihood they can't just pivot

spk_0 the people to something else they can't they can't really we could the same at the same profit

spk_0 I mean you you can also justify I think what what the condition that is getting by assuming that

spk_0 you are a small country and you could then turn around and serve you prox somewhere else you are

spk_0 not going to affect the price the global price so you can still record those losses somewhere else

spk_0 while you cannot really maybe so easily import the thing from this country sorry can I I want to

spk_0 just get clear on things because if there is in the model related to how profitable the activity

spk_0 is the elasticity of trade so I think it can't just like Matt so the elasticity is going to be reflected

spk_0 in the price the model you know the model is the simplest model you can write so basically assume

spk_0 there are many many goods each country's each country's good is different it's not that we are

spk_0 all producing pork there's Polish pork and the Korean pork and they're not completely identical

spk_0 and then there's a parameter that measures how identical they are so obviously if if I'm

spk_0 withdrawing pork from the United States and this is the same pork that the United States could get

spk_0 from somewhere else then I have very little power but if it's different when it's it's always

spk_0 increasing in that but this effect this thing about why do I use exports instead of imports

spk_0 that Anthony started asking about that's about that's about this I think I mean I think that's

spk_0 about this idea of like kind of frictionless stopping right that's like the that's the thing that

spk_0 makes the the one second order in the other first order he does have an extension in the paper

spk_0 or can't you just to discuss but he says within this model that he wrote you would have to really

spk_0 assume very high cost to to over change prediction now you ask me whether I'm satisfying that

spk_0 I do think that you could probably write a different model where it wouldn't be so

spk_0 surprisingly wouldn't have to make really strange assumptions about the parameters to get a different

spk_0 prediction so in that sense I I did not come out feeling he convinced me that he imposed the number

spk_0 one thing but what I liked about this you know he took it to get this very question verse

spk_0 year's free and he wrote a simple model and I think this high feel about a lot of what's in the

spk_0 paper he wrote a simple model and he got this prediction and now you know it's onto other people

spk_0 to try to think about again what what's frictionless you have to start putting to overturn this

spk_0 and then I just I don't want to think and then you know to hit it to the data which we also can

spk_0 talk about how convincing this is but he takes the data it seems to find the confirmation that

spk_0 at least some factors that he's predicting seem to be related to to to to this finding that it's

spk_0 the important matters more and not dance I think in some sense like the key question is not like

spk_0 like obviously that kind of like you only do it with export side is model specific and not like

spk_0 right that can't be it can't be true that we never use import style it's not true right and that's

spk_0 fine I think the key question is really if you think about the the important comparative statics

spk_0 of his paper because really what we're interested in I think from this model is that the model the

spk_0 model says like here's a way of thinking conceptually about the use of economic levers to exert

spk_0 international power and I want to know whether or not the world is consistent with countries using

spk_0 economic leverage to exert political power and so I'm going to get some predictions out of my

spk_0 model and see if those predictions seem like they're true in the data to see whether the like using

spk_0 international power lever seems the things that using the international power lever predicts are

spk_0 consistent with what's going on in the world and so I think the key thing is the kinds of leverage

spk_0 he uses empirically so changes in these last days changes in political alignment and the like

spk_0 when those move in a in a world where I was choosing a mix of export and import controls to do

spk_0 this as opposed to to just the one or just the other are they going to kind of move together or

spk_0 are they going to move in like I think that it's a reasonable guess to say like even if I'm using

spk_0 a mix of them like the comparative statics will be the same like I'm going to I'm going to use

spk_0 exports and I'll probably use some imports too and so we're not getting that prediction

spk_0 correct right but like they're both like they're going to respond in the same direction to elasticity

spk_0 they're going to change respond in the same way to to changes in alignment and so then I think the

spk_0 the sort of abstraction away from getting the mix is probably okay for what he's engaged in.

spk_0 You jump immediately to the second question where you say you know the big question of this paper

spk_0 is whether we do see countries of the sizing power but I think a big to me at least the big one of

spk_0 the biggest questions of this paper is exactly what I'm going to ask me about when I think about

spk_0 the question. I can't remember. Did you even have that for the day? Did you even

spk_0 say that question? I don't remember the question. No so to me the big question was if I want to shape

spk_0 my power my international power related to trade how should I structure my trade when

spk_0 Germany was trading in Russia and I was going to say we are trading so Russia will never

spk_0 start any conflict in which we were going to disagree. But you know the question the question I

spk_0 think a lot of people's mind was well if they engage in a conflict who actually has never had

spk_0 and he takes this question seriously and he delivers an answer the person that's you know in

spk_0 the graph is speaking the country that's importing is an advantage vis-à-vis the other country has

spk_0 a disadvantage. Now, Anthony asked you know whether I find this completely persuasive and here you

spk_0 know I think I'm not convinced 100% but I think it's a pretty good start and now it's on to the next

spk_0 person to sort of try to poke calls in and all that. Now going back to the second thing goes you

spk_0 said when he goes ahead and tries to see that do countries exercise power unfortunately he does

spk_0 not see he does not observe in his data whether I'm now restricting my import or

spk_0 restricting my export he doesn't see that but even then in his model it's it's not it's but he assumes

spk_0 that when I'm trying to punish Anthony I'm going to restrict my export to him but he's also the

spk_0 same time going to be punishing me and we're holding his export to me so whether we are both

spk_0 is for you know with holding exporter import it's not relevant the important driving driving

spk_0 a mechanism is that in his model me with holding export is not hard yeah so can we import you know

spk_0 not importing from me yeah can we do let's talk about that a little bit so I think this your

spk_0 Germany Russia example in the interview was really interesting and important. Germany thought

spk_0 Germany thought it could leverage the fact that it was an importer of natural gas from Russia by

spk_0 saying like hey you sell us a lot of natural gas we're done with you and that didn't work because

spk_0 those kind of import strategies are cutting off your notes despite your face first order as opposed

spk_0 to Russia you say well you don't have to pump natural gas but I don't think that second part

spk_0 which is what his story is right I don't think that second part's quite right that what happens is

spk_0 because the trade sanctions aren't our full of holes Russia says not oh I don't have to produce gas

spk_0 they say the Indians are available the Iranians are whatever there are people to buy from me and so

spk_0 maybe I have to sell it at a slight discount maybe it's just that it's just that there's plenty

spk_0 of demand for this thing and so it's not that easy what I'm saying which is a different mechanism

spk_0 I agree with you that this is you know this could be an explanation for what happened

spk_0 between Russia and Germany but on the other hand you can tell the same story from the part of

spk_0 your Germany that Germany also could have people did and then export imported oil from other

spk_0 countries and somehow it seems like this is impossible for for Germany to do and it's easy for Russia

spk_0 to sell it to other countries I still that's just not quite their story that's not the story of a

spk_0 model that's not the story of a model I wouldn't think there are other things you know you are adding

spk_0 an extra story as they you know maybe Russia didn't care about their import their export drying up

spk_0 because actually it didn't dry up right yeah I'm saying yeah the same way you could say maybe you know

spk_0 uh generally shouldn't care about their uh import drying up because maybe they're imported in dry

spk_0 somehow they import dry up I understand it's a different story but um I guess when you were talking

spk_0 I was thinking about you you're gonna say something different you're gonna say that we did not see

spk_0 Russia being eager to withdraw import from the export to Germany it seems like Russia

spk_0 have been happy to send um to send oil to Germany but I think for to that I think I have an answer

spk_0 because if Germany is on a punish Russia for the English if you're going to be a Russian

spk_0 yeah I don't find that confusing at all they gave Germany and Russia aren't at war like I don't

spk_0 think Russia doesn't need to starve Germany it's just not Germany now try to punish Russia

spk_0 so let me can I try to put the story in layman's terms which I think makes a lot of sense is I

spk_0 as a country I have a lot of power over you as a country if I sell you something if I sell you a lot

spk_0 of something that you can't buy from somewhere else and in principle I also have power if I buy a

spk_0 lot of things from you that you couldn't sell elsewhere although for reasons we've been talking

spk_0 he thinks that the the former story is a is a more important one um so all of that seems seems

spk_0 kind of obviously right in some sense and then the question is what are the implications of that I

spk_0 then get things out of you that I couldn't get out of you otherwise because I'm in this position

spk_0 of power I think what's more important is the X-anti part which is that I will now distort my economy

spk_0 to put myself in a position to have leverage every I think that's the important thing is that

spk_0 I will use industrial policy I will use trade policy and the like to distort my economy towards

spk_0 high leverage export goods rather than the kind of um uh comparative advantage story that we're used

spk_0 to from trade and so we're going to end up with countries having economies that are

spk_0 inefficiently distorted away from the you know the equilibrium uh that's sort of right the

spk_0 the sort of cradle optimum because the the power free cradle optimum let's say um because they want

spk_0 to because they because they want to X-anti make uh political investments that allow them to

spk_0 then exercise power in the international system but yes but I think I'm sorry but yes but I think

spk_0 I'm sorry this question makes sense so yes I'm going to try to build my power you're going to try

spk_0 to build your power at the end of the day who knows maybe we'll go back to to to to having exactly

spk_0 the same power so the beginning but we have destroyed three trades so we've destroyed part of the pie

spk_0 but there's you know we can't completely shape I think our trade really is you have some

spk_0 now once you have some I don't have you have some some natural resources and so there's still

spk_0 this part of the story we have some power that comes from the patterns of trade whether we shape it or

spk_0 not and now we can use a check size this power and get some other concessions in completely different

spk_0 policy areas so it seems like all of that seems kind of obviously right and interesting there's a million

spk_0 empirical identification challenges if we're then going to go see like how much is this actually

spk_0 happening both like to what extent are you distorting your economy in ways that make you more

spk_0 powerful in the international sphere that seems very hard to to know what the counterfactual is

spk_0 and then if we're going to then estimate the effect of those things there's a huge identification

spk_0 challenge because given that story economic changes are going to coincide with changes in the

spk_0 proclivities of your leader changes in your foreign policy needs etc so it all just seems like a

spk_0 mess and then on top of that we don't really know we know how much countries are trading with each

spk_0 other we know which other we don't know kind of what those kind of factuals are we don't know

spk_0 how easy would it be if I stopped selling to you how easy is it for you to buy something similar

spk_0 from other countries so all of those things seem kind of hopeless to measure I don't know well and

spk_0 yet they're at this paper yeah it's an empirical paper I mean I would say like I think it's how I'll say

spk_0 that sentence like the two contributions here relative to you know a 50 60 year old literature

spk_0 and international relations on economic relations and the exercise of power are one the model that gives

spk_0 this this nice characterization of the of exports versus imports as a tool and then the micro data

spk_0 and the attempt at the attempt at some identification of some of these ideas I think that that IPE

spk_0 literature has is again it's not my area but is you know more cross-sectional in its in its

spk_0 sort of empirical approach and more descriptive and less micro than this and and then you get this

spk_0 nice sort of idea from the model about imports versus exports having an asymmetry and I think

spk_0 those are the two like the idea as you say like the common sense idea that we can use our trade

spk_0 relationships as like you can just I mean this is obviously true that we use our trade relationships

spk_0 to try and exercise power like it has not gone without notice that there's things like sanctions and

spk_0 tariffs and that those are used as tools of state graph not just tools of economics to your chip

spk_0 and so I think I do think like that's that's really the what this paper is trying to do relative to

spk_0 the existing literature is that I also have this general frustration with this literature it's not

spk_0 my literature so I don't you know you read these papers and I are an IPE and usually they don't do

spk_0 a very good job of telling you like what the data even is and how usually that I don't know

spk_0 to the blah blah blah I mean I skipped that part of your papers too so I don't know so maybe

spk_0 and maybe we all I just trust people have people have some data and I'm like I assume that's

spk_0 like some numbers I'm spreadsheet but you think they would at least tell you like we collected data

spk_0 from news reports and we quantified this thing but usually it's not that I think they say fear that

spk_0 they're gonna tell me that and so I skipped that section I see I see you know so we actually talked

spk_0 with David a little bit about this so first of all the paper has again I don't even know but

spk_0 at least one how the 70 pages I can read while not reading the section it seems to me they are

spk_0 careful describing the data and also they do media superbassness checks and you know try to try to

spk_0 as much as possible but we talked about the fact that in particular this paper first of all you have

spk_0 a lot of flexibility on the moment inside so you could write a model probably with a different

spk_0 connection and then it's not always other than the that the measure of trade it's not obvious how

spk_0 to measure almost anything in this model like how do we measure yeah the exercising yeah because

spk_0 this measure of like whether whether negotiations of some like whether leaders meet with each other

spk_0 or whatever and you don't have any idea what's going on at those meetings and yeah

spk_0 yeah yeah and you could exercise a lot of power with no meetings and you could yes and we've

spk_0 all sat through pointless meetings not since I became dean but I remember them under previous

spk_0 regimes the faculty retreats going to be great on Friday I don't know you're talking about

spk_0 and also you know there's a one measurement also like you know you can think maybe like yeah maybe

spk_0 there's a bias in how we measure even those meetings are reflective of exercise of

spk_0 so there's a lot you know there's a lot of judgment there were lots of judgment calls even

spk_0 they get set and then you know I have to classify all those things somehow and use some

spk_0 thresholds and then I can choose there's no theory guiding you know so he's completely aware of

spk_0 the of your concern and I think you know he and I have two responses like one of his responses was

spk_0 look you know people felt that there's just really no room to do empirical work on that that's

spk_0 convincing in any way because you know we have it's just a cross-country comparison or what is it

spk_0 and like conflicts are so rare and he's a spec I feel like you know I've demonstrated that there's

spk_0 actually quite a bit of data that you've been tried to use maybe it's not extremely convincing but

spk_0 it's you know it's it's a step in the right direction the second thing I think is if you take his

spk_0 model if you take his model if you believe his model if you so you find convincing that import is

spk_0 the thing that's more painful to lose then he creates a script list of this which I think I

spk_0 really fascinating where he says like you know here's how the powers used to be distributed

spk_0 as of now and for not you don't need any identification strategy and I think it's already

spk_0 you still need to know the kind of actually you still need to like estimate easy access cities or

spk_0 you need to know of course of course but you know that to my understanding of the leadership that

spk_0 I'm also trying not to read is that researchers have made quite a bit of progress trying to estimate

spk_0 all the services of course there are a lot of searches and trying to do that so we are yes sure but

spk_0 you know just to some to some degree you can do um check some each check no like obviously if I need

spk_0 you know computer chips and they come on from Taiwan I'm not going to buy like some

spk_0 um

spk_0 much lower quality they want so yes Taiwan

spk_0 Taiwan some much lower quality chips from somewhere else and that is why Taiwan has so much power over China

spk_0 I do I make a joke but actually it highlights another point I want to do I mean we should talk

spk_0 about the empirical work at some point and there I mean he does have some ideas about they have

spk_0 some ideas about identification I do think at a conceptual level another thing I thought about

spk_0 there okay so they have this in their descriptives right they have this finding that the United

spk_0 States is sort of underpowered relative to its uh economy and China's overpowered relative to

spk_0 its economy which maybe is about about distortions is maybe simply about natural endowments the other

spk_0 thing that I sort of started thinking about when I thought about that descriptive and that comparison

spk_0 and then the Taiwan point is that there are there is another obviously important tool of the exercise

spk_0 of international power which is military capacity it seems likely to me that there are that those

spk_0 are substitutes that that if I'm a leader thinking about my standing in the international arena I might

spk_0 think of myself as having two levers guns and butter essentially that I can distort my economy to

spk_0 increase other people's export exposure to me or my exporting of of inelastic export goods I could

spk_0 build my military and in a world in which I have a very strong military maybe I don't do as much

spk_0 economic distortion because I've chosen the distortion on the spending on the military side

spk_0 and now that allows me to trade a little more freely or to be right and if I'm militarily weaker maybe

spk_0 I do more you see what I mean that there's trade-offs there and leaders actually can balance between

spk_0 them and so if I'm if I'm Taiwan and I'm exceptionally militarily weak relative to my likely

spk_0 adversaries I want to be as high-leveraged and economic position as I can and if I'm in the United

spk_0 States and I have been four decades and decades and decades the military hedge amount of the world

spk_0 I can afford to be a free trader part of me I wondered a little bit about the absence of the

spk_0 absence of the military side from the model and the way it interacts with some of the descriptors

spk_0 whatever seems important to me for the substance of like the exercise power in the international system

spk_0 that is a creative argument for more military spending I don't know but but I also think I mean

spk_0 I don't think it's a bad create it's not a very creative argument we spend on military so that we

spk_0 can exert power in the world seems like a standard argument for military spending but the fact

spk_0 that like we don't have to distort our economy yes we have we're gonna have to we're gonna have to

spk_0 exert power one way or another and if not this way then yeah then it was gonna be met that's

spk_0 probably right although it's much easier to you know like is it credible that we're gonna bomb

spk_0 you know a country like we would only bomb countries when they're in the Middle East or when

spk_0 when they're really doing something that we hate and you know we're not I mean we have a history

spk_0 of bombing some other places too we know we have a long time you know yeah not long ago we're

spk_0 not gonna bomb France I was a lot during the Carter administration really agregions whereas you

spk_0 know whereas we could we could in principle just you know like put a tariff on you know on french

spk_0 wine and so it's a lot eaten so in that sense it seems like it's better to have the economic tool

spk_0 and it is to have a military tool in that it's more credible that you're gonna use it and it's

spk_0 costly if you have to eat although I think that I think that you're underrating military power

spk_0 a little bit I agree I think it's unlikely we're gonna bomb France I wouldn't like

spk_0 I'm not prepared to take anything off the table at this point but it strikes me as unlikely

spk_0 that we're gonna bomb France although I guess we didn't let anyone my phone drive his car to the

spk_0 UN get to walk because of anyway would we reduce willingness to send resources to NATO efforts I think

spk_0 we would and that is a version of using our military power to to exert international power as well

spk_0 you can use military power in more continuous like ways short of bombing your friends and neighbors

spk_0 too we wouldn't also I think enter a trade war like a full blown trade war with France but we might

spk_0 impose a tariff on french wine or whatever and similarly I think we wouldn't bomb France but we

spk_0 might withhold NATO support for things that France cares about we might decline to sell them a nuclear

spk_0 submarine we might what I don't you know I mean there's things but so so I'm I think I'm with both of

spk_0 yes I think at the military support is more continuous but again you should that do a similar

spk_0 analysis there which is you know if I'm withdrawing my support to NATO like Hona and I have

spk_0 made more I'm a harming France more I'm a harming myself more in the long run because

spk_0 definitely France in the case of NATO I'm supporting there the one we're not gonna be

spk_0 enrated right about should they are no but you know last time think the things have and America

spk_0 ended up being part of the war so you know there's a reason why for example Korean troops

spk_0 American troops are in Europe or they are in in Korea yeah no in all cases like there's yeah these

spk_0 things are so it's all exactly there's commitment problems all over the place and I think there's

spk_0 something in trade too yeah but I think there's something I I would think that if you write a

spk_0 full flush one or there's something to what Anthony is saying that the cost of using your

spk_0 economic leverage is small and the cost of using military every one on average on all

spk_0 it depends what kind of disputes you have in mind I don't know if the cause I think it's a slight

spk_0 it's a somewhat blunter instrument I think it's a somewhat blunter instrument and so like if I

spk_0 withdraw some NATO support from France I might be very zero-cost like nothing may happen right or

spk_0 there may be so like there's a there's a kind of right bluntness to it whereas if I if I impose

spk_0 you know tariffs on French wine for sure French wine I'll get a little more expensive in the United

spk_0 States and we won't drink as much of it and that's bad for it but so I think like it's not obvious to

spk_0 me lower cost higher cost is the right thing I think like one is a little more continuous than the

spk_0 other is a little sort of little blunter but they're both but they're both things you can leverage

spk_0 if Russia invades France got for bed we're not then you know we're not whether whatever we said

spk_0 before we we would probably in fact we would help them so and France probably knows that I mean

spk_0 and so that is easier to follow through that might be right in our so I mean maybe there's

spk_0 an interesting thought there which is like with respect to your close friends and allies

spk_0 little moves and trade are more credible because like can we commit on the other hand like it is

spk_0 not at all obvious we will come to Taiwan's aid in the event of a Chinese invasion it is not at

spk_0 like there's like the further you get in the in the chain of relationships maybe the more credible

spk_0 and the more convincing the military side is and so then there's an interesting question I mean that

spk_0 that's a richer model but like maybe you think about building your trade so that you can influence

spk_0 your friends and you think about building your military so you can influence your enemies or your

spk_0 whatever neutral states and you know our relationship I think with with the Philippines or with

spk_0 Indonesia or with Taiwan is different than our relationship with with France or with England and

spk_0 which is the better tool for exercising power of those things maybe different in those cases in

spk_0 interesting in interesting ways and I would like to think to that the kind of disputes where you

spk_0 want to exercise power also different between trends in between adverse areas which you know

spk_0 one important thing in the model is that the disputes are not over trade for example so if you

spk_0 think about the entire power to discuss them not over territory where we are exercising the

spk_0 time power to deterg them but over other things where we can use the mid-tar power or the trade power

spk_0 to exempt leverage it naturally the disputes between adversaries with the how it is more of a

spk_0 you know the entire conflict nature yeah although I mean there's lots of states which are neither

spk_0 our close friends nor our enemies but just other states in the world with whom we trade and with whom

spk_0 we have some sort of limited military coordination potentially and with whom we have diplomatic

spk_0 relations and also all manner of other things you know England and China and interesting thought

spk_0 we teach in our AP tour right now we teach you a foreign aid about how the United States could

spk_0 use foreign aid you know to exercise to exercise power in some other areas and of course the

spk_0 foreign aid coming from the United States is on existence right now but but the interesting thing

spk_0 is that that's not actually true but anyway but that's I mean it's largely diminished certain

spk_0 kinds of foreign aid certainly has a foreign aid we're still doing the trans musicals in Guatemala

spk_0 but you know like I was just really this article about how and I'm sure the stories to be true

spk_0 that one I'm just going to portray but I'm just specifying for the sake of this argument

spk_0 how how would you be able to send its illegal immigrants to African countries at most

spk_0 African countries actually refuse this trade with this kind of deals deal making and now

spk_0 apparently many African countries are willing to engage in this kind of deal making the United States

spk_0 and you know one story one could tell which is considered as papers they realize that the

spk_0 Lashram is going to distort trade and is going to is willing to use trade use use all matter

spk_0 or state power and and they are trying to get on the right the good side of this so does that mean

spk_0 okay let's talk let's talk a little bit about meta social science then because I I think like

spk_0 they're right to say the literature in this space has been very macro and descriptive is my

spk_0 sense again my you know my understanding of this is dated because I don't follow this literature

spk_0 sometime about what it seemed like to me when I was in grad school but so they're taking a swing

spk_0 at trying to do something different and be more design based and be more micro and I guess the

spk_0 question is I might want to see them be even more micro and more design based like oh fine

spk_0 find some natural experiment where you know you know that's you don't have to use that word but

spk_0 find that find some case where for arguably exogenous reasons a country got much better at producing

spk_0 something then there was there was this kind of non-political shock to their trade power

spk_0 with regard to some countries and others and do like a different diff kind of thing and see if

spk_0 in fact they're positioning toward those countries where all the other countries that didn't

spk_0 find that product does that change like try to do like actually talk about the details of each

spk_0 case where we can think about the identification strategy right so you want to say like we discover

spk_0 oil or we discover gold or something and do we then use that to exert international power

spk_0 that'd be interesting well this is the only way to go but I think that seems like that seems like

spk_0 and it's easier to get your head around it I guess think about the model produces clear predictions

spk_0 for cases like that so that would be kind of yeah I mean an interesting kind of prediction is

spk_0 for different kinds of newly discovered capacities of equal value economically your ability to exert

spk_0 economic leverage differs depending on other facts about the global market structure and your

spk_0 willingness to use it also should differ depending on for example your military strength and so

spk_0 there are things I guess you might think about doing there I hear you and I review but I think

spk_0 the paper poses a very interesting I think you know an important question especially in the light of

spk_0 all those you changes in in fritree tariffs and also the narrative that goes with that my reading of

spk_0 the paper and my impression from the interview is not that they feel like this is this is a definitive

spk_0 answer this is how it works it's like we have this super-contribute question let's try to take a first

spk_0 step and you know as far as I can judge they are rigorous sure this you know the body instruments

spk_0 are what they are but when they are trying to implement that they are trying to be careful they're

spk_0 trying to do different bus and stress but you know this is just the first step that they too and they

spk_0 say here's what comes out of that and it's a little bit of a proof of concept here's the kind of

spk_0 data you can look at and now you can only start improving on that like the next question then

spk_0 maybe someone will find an actual experiment to test it or maybe write a slightly different model

spk_0 and I try to convince us that actually you know the predictions should be different and it's just

spk_0 the measurement delivered the answers that were confirming their model I'm not not not because the

spk_0 data confirms the model so I really view it like as I view it as a as a really important step in

spk_0 production of knowledge I feel like I learned a lot maybe not in a way that now I'm retelling people

spk_0 how to structure their trade in order to have power but it really made me think about international

spk_0 trade different thing make me make me think about international disputes when I see them you know

spk_0 I'm now trying to put them against the model and so I guess this consists of the model so

spk_0 as a framework to think about this problem I think it's really succeeded and I think

spk_0 that's my bottom line well I want to continue this matter discussion just for a minute

spk_0 would you have experienced that any less if what they had done was done the model and done the

spk_0 descriptives and not try to do anything identification-y now maybe trying to do things identification-y is

spk_0 part of the step on the road for somebody else but like I think your experience of this would help

spk_0 me think about trade relationships and be a framework for thinking and make whatever that

spk_0 that all would have been the same without any of the without any of the but that's how I feel

spk_0 about a lot of I've got imperial work in general yeah I mean yeah obviously I mean especially

spk_0 out here on not another bardic instrument podcast we even have a lot of bardic things

spk_0 to mind your reason but yeah sometimes people just spend over backwards and we need to make

spk_0 heroic assumptions in order to claim that they have a part in the paper where there's you know

spk_0 they they're some cause-honest they may as opposed to reasonable gentle assumptions like Nash

spk_0 Eqlippi everybody just success which is at the core of the core of Nash Eqlippi but also

spk_0 that's part of it which also you know it's interesting I think discussing itself but yeah no I'm

spk_0 going to be a guy personally with Kevin's paper in half and in mind on that being Kevin half at the end

spk_0 that's a good bottom line but it's not going to be the half you would have kept

spk_0 because of the referees not because of the others indeed it's it's in my experience papers get

spk_0 well going through referees they don't usually get short of that would be but referees yeah

spk_0 says to step in that's a second we have right all the things that they're doing is because of

spk_0 the referees that I've talked to and in the case of this paper that will be the theory section and

spk_0 any reference to political science Anthony what's your bottom line those are a lot of bottom lines

spk_0 I think I know I think I agree with all that I think I like the idea the idea seems seems in some

spk_0 sense obviously right I'm not convinced on the exports imports as you know in terms of that

spk_0 obviously be one dominant in the other but I think the idea seems obviously right it obviously

spk_0 plays an important role in international politics I'm not convinced on the empirics but that's not

spk_0 that's not necessarily I mean I don't want to say that too strongly because I just haven't

spk_0 spent enough time to really like dig into them and think about where the identification is coming

spk_0 from and whatnot so I just seems like an extremely difficult problem to solve empirically and I'm

spk_0 not convinced they've done it but that doesn't mean they haven't done it it just means it just means

spk_0 I don't know enough to be able to a pine on that well obviously I like the paper and I think

spk_0 I think some issues that we raised today also you know making me even more convinced that there's

spk_0 still a lot to be researched on that front you know that this interesting direction in the

spk_0 military power and and trade in bars is there are different kinds of power you can also think about

spk_0 I think thinking a little bit more about our alternative models that we could write were

spk_0 you know maybe we don't think about Nashborg and maybe we should think about different kind of

spk_0 bargaining maybe we have all kinds of failures you know those are very complicated things to put

spk_0 in the model but I think those are those are some issues to think about the next floor and one

spk_0 issue that maybe does some action that I think is important to think about is he focuses they

spk_0 focus on bilateral relationships but obviously we have you know multi-lateral relationships we can

spk_0 cars what country to cars another country and how this point interacts with what they're doing

spk_0 here it's also very interesting I'm looking forward to seeing more papers on this topic yeah I mean I

spk_0 I like the topic too I do think there are like when you start thinking about the use of

spk_0 various levers to exercise state power there's all sorts of interesting interactions

spk_0 to think about I think about thinking about whether economic tools and military tools are

spk_0 substitutes and components are when and when I think classic political economy questions do you

spk_0 form trade and trade relationships alliance relationships abilities to engage in leverage

spk_0 in the like to tie the hands of your successors all sorts of very natural questions and there is

spk_0 I think like you know I I think it's good to see this this sort of formalization and an attempt at

spk_0 bringing some micro data I do think there is a really rich tradition in international relations

spk_0 thinking about those questions that is worth engaging with with better models and better data

spk_0 I think that would be a good interaction between political science and economics so I hope it goes

spk_0 that way but yeah I think good question interesting paper nice model and there was data

spk_0 thanks for listening to not another politics podcast if you like what you heard please leave us

spk_0 a review if you don't like what you heard please send an angry email to one of my co-hosts

spk_0 our show is a podcast from the Harris School of Public Policy and is produced by Matt Hodepp

spk_0 and Leah Seasreen

Can Trade Be A Weapon Of Global Power?

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