State Power and the Structure of International Trade.doc

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29 Mar 2012
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State Power and the Structure of International Trade
Stephen D. Krasner
Addresses the relationship between the interests and power of major states and the trade
openness of the international economy
Maintains most significantly that the hegemony of a leading power is necessary for the
creation and continuance of free trade
International structures may range from complete autarky to complete openness
Presents one aspect of the international economy the structure of international trade; the
degree of openness for the movement of gods as opposed to capital, labor, technology or
other factors of production
State power theory; assumption that the interests and power of states acting to maximize
national goals determine the structure of international trade.
The Causal Argument: State Interests, State Power, and International Trading
Structures
States act to maximize their aggregate economic utility
State Preferences
The ways in which these are affected by the degree of openness depends upon the
potential economic power of the state
There are four principal goals of state action: (related to international economic structure)
1. Political power
o The higher the relative opportunity cost of closure for trading partners, the
weaker the political position of the state
o The larger and more developed state will enjoy this; less OC of closure
2. Aggregate national income
o The greater the degree of openness, the greater this level will be
o This applies to all states regardless of their size or level of development
3. Economic growth
o Openness furthers the economic growth of small states and of large ones
as long as they maintain their technological edge
4. Social stability
o The greater the degree of openness, the less the level of social stability;
opens the domestic economy to the demands of the world market
o Social stability is challenged as there is friction in moving factors (labor)
o This is mitigated by larger size and greater economic development
From State Preferences to International Trading Structures
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