PSCI-1102 Lecture Notes - Lecture 23: Free Trade, Limited Government
4 Nov 2016
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Document Summary
Political relations of states affect their level of trade. Democratic dyads trade more than other pairs of states. Conflict directly and indirectly reduces trade flows between states. The greater the degree of common interests between a pair of states, the greater will be their trade flows. Nations may manage their trade policy to direct trade flows toward nations with similar systems. States with limited government may be more attractive trade partners. Democracies and limited government have gone hand-in-hand historically. States will be reluctant to trade with another state that may use its added wealth to increase its military capability against it. This effect will depend on the polarity of the system. Common interests and mutual democratic institutions increase trade flows between states. The effect of alliances on trade flows is uncertain; they may increase or decrease trade - higher between allies in multipolar system than between allies in bipolar systems.
