When Do Conflicting Political Relations Affect International Trade?

Abstract

Limited commercial integration between India and Pakistan or within much of the Middle East suggests that conflicting political interests between countries can have a detrimental effect on their economic relations. But rapidly growing economic ties between Mainland China and Taiwan show that commerce can also flourish even in the presence of very hostile relations. I explore this variation and hypothesize that the effects of international political conflict on trade are less severe in cases where internationalist economic interests have relatively strong political clout domestically. Simple quantitative tests on a sample of seventy-six countries over the years 1961 to 1992 are supportive; further evidence is provided via a brief case study of Mainland China-Taiwan relations.

Paying a Visit: The Dalai Lama Effect on International Trade

“…Furthermore, Kastner (2007) argues that states may disrupt trade with their partners in order to signal resolve in a bilateral disagreement they may have occurred over matters unrelated to trade. Moreover, trade reductions are not necessarily the result of direct government action to sanction a state.…”

“…Gowa and Mansfield (1993) Combining both approaches, Morrow, Siverson and Taberes (1998) find that joint democracy and common interests of commercial partners increase bilateral trade between commercial partners, whereas no effect is found for conflicts and alliances between countries. In a more recent study, Kastner (2007) finds evidence that the trade-reducing impact of poor bilateral political relations is reduced if internationalist economic interests are strong, which is proxied by low trade barriers.…”

“…A frequently used measure for the extent of bilateral friendship is the degree to which countries vote in line with each other in the United Nations General Assembly (UNGA) (e.g., Richardson and Kegley 1980, Barro and Lee 2005, Dreher and Jensen 2007, Kastner 2007, Dreher and Gassebner 2008. Although this measure has its drawbacks, it also has the advantage that it is available for virtually every country in the world over a long time period.…”

How International Political Conflict Hurts Country Image and further Influences Consumers’ Purchase Intention

“…Previous academic literature has also explored the results of international political conflicts in various areas such as trade，foreign direct investment，tourism, and cultural collaboration (Alvarez & Campo, 2014;Heilmann, 2015;Huang, Wu, Yu, & Zhang, 2015;Kastner, 2007). However, little is known about the impact of international political conflict on the individual consumers' purchasing behaviors.…”

Choice or Circumstance? Adjusting Measures of Foreign Policy Similarity for Chance Agreement

“…Explicitly or implicitly, the degree of similar or opposing state interests forms part of most explanations for international cooperation and conflict. For example, similar state interests are hypothesised to foster bilateral trade (Kastner 2007;Morrow, Siverson, and Tabares 1998), to increase the chances of receiving military and development aid (Derouen and Heo 2004;Neumayer 2003), to improve the effective functioning of international institutions (Stone 2004), to reduce the incentives to harbour foreign terrorist groups (Bapat 2007), and, of course, to decrease the risk of conflict and militarized disputes (Bearce, Flanagan, and Floros 2006;Braumoeller 2008;Gartzke 2007;Long and Leeds 2006). …”