Showing papers on "Economic interdependence published in 2014"

Domestic Institutions beyond the Nation-State: Charting the New Interdependence Approach

Abstract: What is the relationship between domestic and international politics in a world of economic interdependence? This article discusses and organizes an emerging body of scholarship, which the authors label the new interdependence approach, addressing how transnational interactions shape domestic institutions and global politics in a world of economic interdependence. This literature makes three important contributions. First, it examines how domestic institutions affect the ability of political actors to construct the rules and norms governing interdependent relations and thus present a source of asymmetric power. Second, it explores how interdependence alters domestic political institutions through processes of diffusion, transgovernmental coordination, and extraterritorial application and in turn how it changes the national institutions mediating internal debates on globalization. Third, it studies the shifting boundaries of political contestation through which substate actors affect decision making in foreign jurisdictions. Given the importance of institutional change to the new interdependence agenda, the authors suggest several instances where historical institutionalist tools might be exploited to address these transnational dynamics, in particular, mechanisms of cross-national sequencing and change strategies of substate actors. As globalization continues, it will be ever more difficult to examine national trajectories of institutional change in isolation from each other. Equally, it will be difficult to understand international institutions without paying attention to the ways in which they both transform and are transformed by domestic institutional politics. While the new interdependence approach does not yet cohere as a single voice, the authors believe that it offers an innovative agenda that holds tremendous promise for both comparative and international relations research as it calls on scholars to reconsider the dynamic nature of globalization for global politics.

Responding to Voters or Responding to Markets? Political Parties and Public Opinion in an Era of Globalization

Abstract: Conventional wisdom has it that political parties have incentives to respond to public opinion. It is also conventional wisdom that in open economies, policymakers must also “respond” to markets. Research on representation has provided ample evidence in support of the first claim. Research on the political economy of globalization has not, however, provided evidence for the second. This article examines the effects of globalization on how parties respond to voters. We argue that while elections motivate parties to respond to public sentiment, economic interdependence distracts political elites from their electorates and toward market actors, reducing party responsiveness to the mean voter. Evidence from a pair of distinct data sources spanning elections in twenty advanced capitalist democracies from the 1970s to 2010 shows that while parties have incentives to respond to left-right shifts in the mean voter position, they only do so when the national economy is sufficiently sheltered from the world economy. These findings have implications for party strategies, for representation, and for the broader effects of market integration.

Handbook of International Economics

Abstract: Macroeconomic theory and policy: How the closed economy was opened (P.B. Kenen). Asset markets, exchange rates, and the balance of payments (J.A. Frenkel, M.L. Mussa). The specification and influence of asset markets (W.H. Branson, D.W. Henderson). The specification of goods and factor markets in open economy macroeconomic models (N. Bruce, D. Purvis). Stabilization policies in open economies (R.C. Marston). Exchange rate dynamics (M. Obstfeld, A. Stockman). Empirical studies of exchange rates: Price behavior, rate determination and market efficiency (R.M. Levich). Income and price effects in foreign trade (M. Goldstein, M.S. Kahn). Empirical studies of macroeconomic interdependence (J.F. Helliwell, T. Padmore). International money and international monetary arrangements (S.W. Black). Economic interdependence and coordination of economic policies (R.N. Cooper).

Does California need Delaware? Explaining Indonesian, Chinese, and United States support for legality compliance of internationally traded products

Abstract: The purpose of this paper is to shed light on the emergence and institutionalization of a unique form of transnational business governance (TBG): legality verification (LV) systems, which track products along global supply chains. Instead of imposing wide ranging global standards commonly applied through “gold standard” certification systems, LV helps domestic governments enforce their own laws. Three processes help explain why Indonesia (as a producer), China (as a manufacturer) and the United States (as a consumer) moved, in the 2000s, from lukewarm interest or opposition to formalized support: how triggers enabled by economic interdependence are pulled; how ceding of instrument/process state sovereignty may reinforce substantive sovereignty; and historical institutional processes that shift organizational interests and problem definitions. Looking backward, the empirical results are consistent with a “Delaware effect” in which economic globalization is asserted to lead to a “ratcheting down” of environmental and social standards. Looking forward, we theorize about, and identify the conditions through which, widespread coalitions in support of the institution of LV, may pave the way for a “ratcheting up” process that is consistent with, but nuances, Vogel's “California effect.”

Power Shift or Paradigm Shift? China's Rise and Asia's Emerging Security Order

Abstract: This essay proposes a new theoretical framework for analyzing the rise of China and its impact on Asian security order. While the rise of China is reshaping Asia's military balance, the region has also witnessed equally important and longer-term changes, especially economic interdependence, multilateral institutions and domestic politics. The implications of these changes are not fully accounted for by the different types of security orders proposed by analysts to describe the implications of China's rise, such as anarchy, hierarchy, hegemony, concert, and community. This essay presents an alternative conceptualization of Asian security order, termed consociational security order (CSO) that draws from different theoretical lenses: defensive realism, institutionalism, and especially consociational theory in comparative politics. Specifying the conditions that make a CSO stable or unstable, the essay then examines the extent to which these conditions can be found in Asia today. Aside from offering a distinctive framework for analyzing China's rise, the CSO framework also offers an analytic device for policymakers and analysts in judging trends and directions in Asian security.

Peace through globalization and capitalism? Prospects of two liberal propositions:

Abstract: The security externalities of globalization and capitalism continue to play an influential role in peace research. Typical contributions to these interrelated areas of scientific inquiry address the hope that the external openness (commercial liberalism) and the internal freedom of an economy (capitalist peace) pacify interstate as well as intrastate relations. I claim, despite the empirical support both theses have received, that they face considerable analytical hurdles. Commercial liberalism has, on a theoretical level, not yet moved much beyond the opportunity cost arguments that enlightenment philosophers first advanced more than 200 years ago. The capitalist peace research program similarly does not offer clear micro-level mechanisms explaining why the interactions between economic agents and political decisionmakers should be more peaceful in capitalist than in state-dominated economies. Drawing on the political economy literature, I argue that economic liberalism should distinguish between level- and change-effects of both globalization and capitalism and that thinking in analogies between domestic and interstate peace has prevented the field from making analytical headway. Both literatures will only profit from the advent of ‘big data’ in the case that the field addresses the theoretical challenges upfront.

Primacy or World Order?: The United States and China's Rise—A Review Essay

Abstract: How should the United States respond to China's rise? What are China's longterm strategic goals? What are the implications of U.S.-China strategic interactions for world order? Three recent works—Aaron Friedberg's A Contest for Supremacy, Hugh White's The China Choice, and Yan Xuetong's Ancient Chinese Political Thought, Modern Chinese Power—grapple with these questions in authoritative and revealing ways. This review essay examines the answers provided by these authors, with the aim of clarifying the different underlying assumptions that led them to their conclusions. Four themes are found to be especially pertinent. These are the assumptions the authors hold about the existing distribution of power, China's strategic objectives, the role of economic interdependence in Asia, and the relationship between democracy and political legitimacy. The way the authors parse these themes—which ones they bracket or admit into their analysis, and how they weigh and combine them—helps to reveal the underlying bases of...

Neo-Kantianism and Coercive Diplomacy: The Complex Case of Economic Sanctions

Abstract: Although voluminous research connects the neo-Kantian triad—democracy, economic interdependence, and intergovernmental organization membership—to amelioration of conflict processes, comparatively l...

Bridging Troubled Waters: China, Japan, and Maritime Order in the East China Sea

Abstract: Bridging Troubled Waters: China, Japan, and Maritime Order in the East China Sea. By James Manicom. Washington, D.C.: Georgetown University Press, 2014. Softcover: 266pp. In this book, James Manicom contests the orthodox view that the strategic rivalry between China and Japan will escalate into a full-blown military conflict. The book concedes that the East China Sea will be the likely medium for Sino-Japanese military rivalry and cyclical tensions will persist; however, it makes the compelling case that cooperation will endure. The book explores the intriguing relationship between China and Japan, which has been paradoxically characterized by deep economic interdependence, yet beleaguered by periodic tensions over their maritime disputes, lingering strategic mistrust and even brinkmanship. The book examines the origins, nature and durability of cooperation between China and Japan despite historical and existing conflicting interests between the two countries. The author interrogates an interesting question in International Relations theory on how China and Japan have avoided conflict over their maritime disputes, notwithstanding the seemingly incessant military posturing and sabre-rattling at sea and yet managed to cooperate while resisting settlement of underlying issues. The book explores this central point in depth by comparing five attempts at cooperation in the East China Sea in the areas of disputed sovereignty, fisheries management, marine surveys, and hydrocarbon resource development. Throughout the book, Manicom makes it clear that he does not share the cynicism expressed by scholars that disputes over resource-rich maritime space are fundamentally prone to conflict. Indeed, lurking in every corner of the book is Manicom's insightful, if but slightly overarticulated, thesis that, "contrary to pessimistic assessments, the two countries have been able to cooperate on contested jurisdiction when material issues have been separate from the more symbolic aspects of their relationship" (p. 11). This is not to disparage the central empirical finding of the book, however. In fact, the simplicity of Manicom's proposition belies its innovation. The focus of the book on cooperation, while not an entirely novel approach, is quite refreshing in the study of China-Japan maritime relations. His thesis also leaves the reader cautiously optimistic, which is a rare commodity these days. In order to support the book's provocative core insights, Manicom presents important and interesting case studies that reveal historical commonalities worthy of sustained reflection. The first case study (Chapter 2) examines the dynamics of crisis and tension management in the context of the Senkaku/Diaoyu Islands dispute, and the collapse of Deng Xiaoping's formulaic modus vivendi to focus on joint development instead of actively pursuing sovereignty claims. The second case study, in Chapter 3, assesses the China-Japan agreement on fisheries--signed in 1997 and which came into force in 2000--which illustrates an example of reciprocal cooperation over an area of mutual interest. The third case study (Chapter 4), explores the 2001 notification agreement over marine surveys in disputed waters. The fourth case study in Chapter 5, traces the confrontational dynamics of resource development in the East China Sea, principally a resource exploitation agreement in 2008, which to date has yet to be implemented. In his analysis of these case studies, Manicom's basic argument is that cooperation underwritten by mutually shared economic interests is easier to achieve compared to cooperation based on strategic issues. In this regard, putting the above cases of cooperation in a continuum, the fisheries agreement is both robust and durable, while the notification agreement is less successful relative to the 2001 resource development agreement. …

Controlling Access to Territory: Economic Interdependence, Transnational Terrorism, and Visa Policies

Abstract: Previous scholarship has largely failed to address the effect of economic interdependence on issue areas other than interstate conflict. This study seeks to redress this lacuna by focusing on states’ visa policies and examining the impact of trade and capital interdependence in the context of transnational terrorism. The article argues that economic ties affect visa policies through a reconfiguration of preferences and the opportunity costs of economic loss and by tempering the impact of terrorism. To support this claim, the study conducts statistical analysis using directed dyad data on the visa policies of 207 states and independent political units. The article shows that the impact of economic interdependence is contingent on whether states are directly targeted in attacks of terrorism or face indirect threats from global terror. The study finds that economic incentives overwhelm security concerns when threats are indirect but have relatively limited influence, given threats against a state’s own citiz...

Complex interdependence and China’s engagement with Australia: navigating between power and vulnerability

Abstract: China has become heavily dependent on Australia for resource supply as a result of her rapid economic growth over the 2000s. Stable and reliable resource supply from Australia has become a matter of national economic security. Yet, China’s resource relationship with Australia is grown out of a delicate geopolitical framework, because Australia is not only a resource superpower but also a staunch U.S. ally in the Asia-Pacific region. Despite extensive economic interdependence between the two countries, China faces a huge challenge to build a genuinely reliable and close resource partnership with Australia. This study discusses how China has pro actively sought to shape or adapt to the evolving power dynamics behind the bilateral resource politics over the 2000s. It provides a relevant case study on the resource politics between a rising great power and a resource superpower under the condition of complex interdependence. China’s search for resource security has become the primary goal of her policy towards Australia in the 2000s. However, China’s engagement with Australia has led to an uneasy resource partnership with growing competitive dynamics and constant power struggle. The political context of the resource ties between China and Australia has changed dramatically towards the end of the 2000s, as the systemic impact of China’s rise has resulted in a deterioration in the strategic dimension of China-Australia relations. This has in turn created considerable constraints and uncertainties in China’s resource cooperation with Australia. Both the difficult resource investment ties and the inequitable iron ore trade relationship show the limits of this resource partnership. Australia’s approach to this critical resource relationship with China remains ad hoc, transactional and oriented to short-term interest maximisation. Despite her growing power, China remains the more vulnerable party in the uneven resource interdependence with Australia. The Chinese have sought to improve their power position vis-a-vis the Australians; but domestic economic constraints and internal fragmentation have considerably undermined Chinese efforts to gain the upper hand in the bilateral resource politics. China has to navigate cautiously between power and vulnerability in her engagement with Australia.

The Formation of a Single Legal Space as a Prerequisite for Overcoming Systemic Risk

Abstract: This article examines the concept of systemic risk, its fundamental origins and the dangers of systemic risk in agiven state in relation to other countries of the world. Methods for minimizing systemic risks in thecontemporary world are looked at, with special attention given to the idea of constructing a single legalframework to address systemic risk. The problem of 'soft law', along with its pros and cons, is discussed and aparallel is drawn with the European legislation in the field of norms standardization. This article discussestransition economics as a source of systemic risk. Data from the Russian Federation and EU countries are givenas examples. The main findings stress the need to adapt international standards to national legislation, andemphasize the need for forecasting, the creation of countercyclical capital buffers, the need to combine the use ofmacro-prudential approaches with monetary policy, and the necessity to regulate institutional structure. It shouldalso be noted, that all government policy, especially monetary, fiscal, and macro-and micro-prudential(supplemented by specific supervision), should be a part of a permanent system of macro-financial stability,created to predict financial crises. The economic crisis has shown that financial stability cannot be guaranteed byeach country independently. This is necessary, but not sufficient. The strong economic interdependence ofcountries in the framework of globalization cannot be excluded from the equation.

Sino-Japanese relations: power, interdependence, and domestic politics

Abstract: China and Japan have been deepening economic interdependence over the last two decades, while China has recently shown territorial ambitions and initiated disputes with Japan. This runs contrary to the commercial liberal literature that argues that trade promotes peace. On the other hand, the realist theory also does not fully explain Sino-Japanese relations because Sino-Japanese relations are not always in conflict. The rise of China and the relative decline of Japan might explain increasing tensions in the rivalry relationship, but what drives Chinese leaders to initiate disputes? I address the importance of domestic politics to examine Sino-Japanese disputes. I argue that the recent deterioration of the bilateral relationship could be explained by the power struggle in the Chinese leadership. To support the logic of this argument, I use a game-theoretic model, which accounts for how the type of Chinese leadership influences foreign policy outcomes in Sino-Japanese relations.

International Economic Interdependence and Exchange‐rate Adjustment under Persistent Stagnation

Abstract: Using a two-country, two-commodity dynamic optimization model with general homothetic preference for the commodities, this paper examines the effects of a tariff and a quota on consumption and employment in the case where persistent unemployment arises due to a liquidity trap. A trade restriction improves the current account, which causes the home currency to appreciate and harms the competitiveness of home firms. Therefore, home employment and consumption decrease while foreign employment and consumption increase. Tariff-quota equivalence is found to be valid. Preference, technological and policy parameter changes that improve the current account in general worsen home unemployment.

US oil strategy in the Caspian Basin: hegemony through interdependence

Abstract: President Obama has continued to emphasise the strategic importance of stable energy supplies to US national security interests, with the oil-rich Central Asian region a key part of global energy markets. This region has seen significant economic and strategic inroads by the United States over the last decade in a broad attempt to integrate it within the US-led liberal order. This article examines these policy developments and draws upon theoretical debates on US grand strategy to argue that, rather than necessarily signalling increasing geopolitical rivalry with other powers such as China and Russia, US policy is designed primarily to incorporate the region through deepening market interdependence. As such, while there is a complex mix of geopolitical rivalry and economic interdependence developing in the Caspian, even in the face of purported US decline and increase of its domestic supplies through fracking, Washington remains committed to acting as a hegemonic stabiliser in the Caspian.

The Unintended Consequences of European Sanctions on Russia

Abstract: If economic interdependence with Europe and the US is seen as a diplomatic vulnerability, countries that might one day face sanctions will look for alternate arrangements that are less easily exploited.

Blue, Green or Aquamarine? Taiwan and the Status Quo Preference in Cross-Strait Relations*

Abstract: Debates about whether China's rise poses a threat or an opportunity for Taiwan have settled into a realist assumption that Beijing will continue to upset the balance of power and a liberal approach that believes the benefits of economic interdependence are leading to greater gains. Missing from this debate is a nuanced consideration of how Taiwan's policy elites view themselves and their position in cross-Strait relations. Taiwan's decision makers' views are deeply affected by, and interact with, factors and institutions on and beyond the island. This article offers a model of political processes – the staying power of the status quo and order of movement – as a possible route towards an explanation for Taiwan's position on cross-Strait negotiations. The conclusion is that the status quo position – de facto but not de jure independence – is becoming more entrenched with time. Taiwan's colours of partisanship, Blue and Green, are blending into Aquamarine.

NAFTA at 20: Misleading Charges and Positive Achievements

Abstract: The North American Free Trade Agreement (NAFTA) between the United States, Mexico, and Canada, which took effect 20 years ago, continues to face divided public opinion. Opponents of free trade agreements (FTAs) cite NAFTA as a job-killing precedent, while proponents argue that the economic gains from NAFTA have been considerable and unappreciated. This Policy Brief analyzes the record of NAFTA in order to clear the air so that the benefits and challenges of trade can be examined objectively. In the last 20 years, trade, investment, and economic interdependence among the three countries have grown dramatically. Nearly 2 million US jobs now depend on trade with Mexico. Closer integration with the United States and Canada has transformed Mexico's auto industry from a minor backwater into a major automotive powerhouse. The analysis presented here argues that increased trade with Mexico led to some US job losses during adjustments but that these were very small compared to the usual churn and to job losses due to other factors over the same period. The pact contributed some to wage losses in manufacturing but not to any lasting and significant increase in US unemployment. Also contrary to what opponents predicted, NAFTA did not encourage more illegal immigration to the United States. Above all, NAFTA created a new foundation for US-Mexican relations by facilitating Mexico's transition to a multiparty political state with a market-oriented system.

Constructing regionalism in South America : the cases of transport infrastructure and energy within UNASUR

Abstract: This paper seeks to contribute to the study of contemporary South American regionalism focusing on the emergence and development of sectoral cooperation and policy coordination within the Union of South American Countries (UNASUR). To do so the paper analyzes two policy areas -- transport infrastructure and energy integration -- from the inception of cooperation in 2000 until 2014, addressing two questions: (i) why regional cooperation has emerged despite the absence of economic interdependence and market-driven demand for economic integration, and (ii) why policy outcomes are evident in some areas (i.e., transport infrastructure) while limited in others (i.e., energy). Bringing together insights from rationalist and constructivist approaches in IR and IPE, it is argued that the emergence of regional cooperation as well as the sharp variation in policy outcomes between areas can be largely explained by the articulation of a regional leadership and its effect on the convergence of state preferences. The paper shows how the Brazilian leadership, incentivized by the effects of the US-led FTAA negotiations and the financial crises that hit the region in the late 1990s, made state preferences converge towards a regionalist project encompassing all South American countries by making visible the mutual benefits of cooperation on transport infrastructure and energy. Furthermore, the paper illustrates how in spite of significant changes in South American states’ cooperation preferences the Brazilian leadership was able to adapt the cooperation process in the transport infrastructure sector to the new circumstances of regional politics permitting not only the institutionalization of sectoral cooperation, but also the implementation of several infrastructure transnational projects. In the case of energy, instead, the emergence of a second regional leadership project – pursued by Chavez’s Venezuela – and the deep divergence of state preferences led energy cooperation into a gridlock.

The development and future of Factory Asia

Abstract: This timely book deploys new tools and measures to understand how global production networks change the nature of global economic interdependence, and how that in turn changes our understanding of which policies are appropriate in this new environment. Bringing to bear an array of the latest methods and data to study global value chains, this unique book assesses the evolution of global value chains at the firm level, and how this affects competitiveness in Asia.

The Determinants of the Level of Cooperation and Conflict in Cross-Strait Relations after 1990

Abstract: This dissertation investigates negative or-positive patterns and the behavioral stability of cross-strait relations with a time-series analysis. It aims to clarify the impacts of these four factors in cross-strait relations: the Cold War legacy, the Chinese Civil War legacy, economic interdependence, and Taiwanese domestic politics. The key findings are as follows. First, most factors suggested by the existing literature only influence the stability, rather than negative-or-positive patterns, of cross-strait relation. For the Cold War legacy, although the United States played an important role in the formation of the U.S.-China-Taiwan triangle, the U.S. influence mainly works on the stability of cross-strait relations in an indirect way. Regarding the Chinese Civil War legacy, the legacy is the only factor that can influence both negative-or-positive patterns and the stability of cross-strait relations. China’s tit-for-tat response to Taiwan is the only significant pattern related to the negative-or-positive change of cross-strait relations, which suggests Taiwan’s special status in China’ policy-making process since 1949. For economic interdependence and Taiwan’s domestic politics, the decline of economic interdependence and the approach of Taiwan’ presidential election both create instability rather than conflict for cross-strait relations. In short, the validity of existing international relations theories, like the commercial peace theory and “election to fight” mechanisms, is not supported by the statistical analysis in this dissertation. Second, the importance of Taiwan is evident, and the conventional wisdom about the conflictive and instable effects of the pro-independence leadership in Taiwan may be more like a myth in cross-strait relations. The results in this dissertation show no evidence to support the presence of a conflictive tendency when Taiwan’s pro-independence leaders are in power. More importantly, with the evidence of China’s tit-fir-tat response to Taiwan since 1979, building an environment to induce Taiwan’s persistent cooperation to China is the key to reduce the future tension in the Taiwan Strait. Finally, although the impact of leadership change in Taiwan is limited, it still works as a good proxy to identify the priorities of Taiwan and China’s behaviors in different periods and synthesize the factors coming from both international and domestic levels. INDEX WORDS: Cross-Strait Relations, U.S.-China-Taiwan Relations, Strategic Triangle, Election, Economic Interdependence, Event Data THE DETERMINANTS OF THE LEVEL OF COOPERATION AND CONFLICT IN CROSSSTRAIT RELATIONS AFTER 1990

Testing Two Explanations of the Liberal Peace: The Opportunity Cost and Signaling Arguments

Abstract: Considerable evidence suggests that economic interdependence and integration reduce the likelihood of militarized conflict. However, scholars have devoted remarkably scant attention to testing diff...

The Impact of Economic Integration within the European Union as a Factor in Conflict Transformation and Peace-Building

Abstract: This study examines economic integration within the European Union as a factor in conflict transformation and peace-building. European responses to causes of frequent conflict and wars after the end of WWII focused on the search for peace, economic cooperation and prosperity. This thesis will focus on three elements: economic interdependence, the expansion of the free market, and economic integration. In-depth examination of these factors reveals that economic interdependence or the exchange of goods and services across inter-state and international boundaries only, is not sufficient to bring peace among states. Economic interdependence may reduce the impact of war, but cannot maintain sustainable peace. Unfair competition fanned by economic nationalism was a strong obstacle to free trade in Europe in the early 19th century. In the 21st century, the expansion of the free trade, with increased understanding has enhanced reduction in interstate conflicts. However, free trade, in and of itself does not constitute a strong factor for a sustainable peace. Free trade may encourage democracy, but the expansion of free trade coupled with interdependence, does not bring sustainable peace. The EU has successfully established sustainable peace through economic integration-the creation of the single market that establish freedom of movement, people, goods, services; and a single currency that facilitates easy transactions. The single market also abolished tariffs and custom duties. By and large, economic integration within the EU has been successful in creating sustainable peace because economic interdependence, and the expansion of the free market have been combined with political integration by building democratic institutions at the intergovernmental and transnational

Mapping global value chains and measuring trade in tasks

Abstract: This timely book deploys new tools and measures to understand how global production networks change the nature of global economic interdependence, and how that in turn changes our understanding of which policies are appropriate in this new environment. Bringing to bear an array of the latest methods and data to study global value chains, this unique book assesses the evolution of global value chains at the firm level, and how this affects competitiveness in Asia.

An Economic Theory of Hegemonic War

Abstract: What are the economic causes of hegemonic wars? When does economic interdependence lead to war? We argue that, given its dominant inuence on the international political economy, an economic hegemon cannot commit to oer

Commerce with competitors: Economic interdependence, vulnerability and security policy in contemporary East Asia

Abstract: iii