Allies, Adversaries, and International Trade

Book excerpt: During the Cold War, international trade closely paralleled the division of the world into two rival political-military blocs. NATO and GATT were two sides of one coin; the WTO and the CMEA were two sides of another. In this book, Joanne Gowa examines the logic behind this linkage between alliances and trade and asks whether it applies not only after but also before World War II. Gowa's analysis of a simple game-theoretic model of trade in an anarchic world leads her to conclude that free trade, in general, is more likely within rather than across alliances, and that it is more likely within the political-military coalitions of a bipolar than of a multi-polar world. An aggregate data analysis of seven countries over an 80-year period supports both hypotheses. Other issues raised by this analysis are examined in detail in a case study of the pre-1914 Anglo-French Entente.