Allies, Adversaries, and International Trade.

• Author: Xenias, Anastasia

Joanne Gowa. (Princeton, NJ., Princeton University Press, 1994) 148pp. Reviewed by Anastasia Xenias

During the Cold War, international trade agreements closely paralleled the division of the world into two major blocs. However, interpretations of the postwar economic order repeatedly fail to assign any substantial role to the Cold War, preferring to delegate the leading role to the emergence of the United States as a benevolent world despot. In Allies, Adversaries, and International Trade, Joanne Gowa -- seeking to fill this void -- focuses on what has been a weakly developed and largely neglected subject in international trade relations, namely the impact of the international political structure on patterns of interstate trade. In this book, Gowa succeeds in developing an intuitively appealing and analytically rigorous explanation of the impact of power politics on interstate trade. She bases her argument on a transformed Prisoner's Dilemma matrix representing free trade and a statistical analysis of trade flows among the major powers. Gowa keenly presents and disposes of alternatives to her construction and objections to her arguments, making for a very thorough and persuasive analysis. Her argument's few flaws are largely due to data limitations, which she acknowledges are beyond her control. Nevertheless, she delivers a direct blow to hegemonic stability theory, the preeminent system-level theory of the relationship between power politics and free trade.

Gowa's topic is a result of her dissatisfaction with this dominant theory. Hegemonic stability theory, she argues, fails to capture an essential dimension of great power interactions and to resolve the question of the political correlates to open international markets. She contends that the play of power politics is an essential element of any agreement to open international markets, due to security externalities produced by trade. These arise because the source of gains from trade is the increased efficiency with which domestic resources can be employed. As a consequence, trade frees economic resources for military uses, thereby enhancing the potential military power of any country that engages in it: "Trade with an adversary produces a security diseconomy; trade with an ally produces a positive externality," she writes. Thus, adherence to a policy of liberal and non-discriminatory trade may not be optimal for states in an anarchic intemational system, which compels its constituents to closely attend to the military potential or capacity of both allies and adversaries. According to Gowa:

Hegemonic stability theory ought to be displaced from its position of prominence, for a simple reason: It neglects the essence of the domain to which it applies, that is, the politics of trade in an anarchic world. As such, it cannot possibly explain the relationship between the play of great power politics...