Hostname: page-component-cd9895bd7-7cvxr Total loading time: 0 Render date: 2024-12-25T07:49:31.442Z Has data issue: false hasContentIssue false

No Business Like FIRC Business: Foreign-Imposed Regime Change and Bilateral Trade

Published online by Cambridge University Press:  03 August 2015

Abstract

Scholars argue that states undertake foreign military interventions for economic reasons, yet few have investigated whether intervention produces economic benefits. This article answers this question in the context of US foreign-imposed regime changes (FIRCs) in Latin America. Because FIRCs install leaders who are sympathetic to the intervener’s interests, economic arguments maintain that these interventions should increase bilateral trade between the targets and imposing countries. Yet security-based arguments assert that FIRCs should have little economic effect, as regime changes target threats rather than generate economic benefits. A third perspective argues that FIRCs reduce trade by generating political instability, which causes foreign firms to cut back on their involvement and domestic firms to experience difficulty getting goods to market. To test these competing arguments, this study employs a novel dataset on bilateral trade (1873–2007) compiled through archival research in Washington, DC. Using a gravity model and synthetic controls, it finds that FIRC produces an average decrease of 45 per cent in the dollar value of bilateral trade. Further analysis of archival sector-level data and case studies cast doubt on alternate explanations.

Type
Articles
Copyright
© Cambridge University Press 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

Department of Political Science, University of California, San Diego (email: [email protected]); Department of Public Policy, University at Albany, SUNY (email: [email protected]); Department of Political Science, The George Washington University (email: [email protected]). Previous versions of this article were presented at the 2013 meeting of the International Studies Association and seminars at UC San Diego and George Washington University. The authors thank Lawrence Broz, Chris Fariss, Mike Findley, James Fowler, Julia Gray, Emilie Hafner-Burton, Kyle Joyce, Miles Kahler, Stephen Kaplan, David Lake, Brad LeVeck, William Reed, Molly Roberts, Phil Roeder, Rachel Stein and Caitlin Talmadge and the anonymous reviewers for helpful comments and suggestions. We also thank the librarians at the Department of Commerce for their invaluable guidance as well as Corey Hill, Michael Joseph, Julia Macdonald and Michael Weaver for excellent research assistance. Zachary acknowledges support from the National Science Foundation and the San Diego Supercomputer Center. All remaining errors are the authors’ own. Data replication sets are available at http://dataverse.harvard.edu/dataverse/BJPolS, and online appendices are available at http://dx.doi.org/doi:10.1017/S0007123415000332.

References

Abadie, Alberto, Diamond, Alexis, and Hainmueller, Jens. 2010. Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program. Journal of the American Statistical Association 105 (490):493505.Google Scholar
Arango, Tim, and Krauss, Clifford. 2013. China is Reaping Biggest Benefits of Iraq Oil Boom. The New York Times, 2 June.Google Scholar
Atzili, Boaz. 2012. Good Fences, Bad Neighbors: Border Fixity and International Conflict. Chicago, IL: University of Chicago Press.Google Scholar
Audretsch, David B., Keilbach, Max C., and Lehmann, Erik E.. 2006. Entrepreneurship and Economic Growth. Oxford: Oxford University Press.Google Scholar
Beck, Nathaniel, Katz, Jonathan N., and Tucker, Richard. 1998. Taking Time Seriously: Time-Series-Cross-Section Analysis with a Binary Dependent Variable. American Journal of Political Science 42 (4):12601288.Google Scholar
Berger, Daniel, Easterly, William, Nunn, Nathan, and Satyanath, Shanker. 2013. Commercial Imperialism? Political Influence and Trade During the Cold War. American Economic Review 103 (2):863896.Google Scholar
Biglaiser, Glen, and DeRouen, Karl. 2007. Following the Flag: Troop Deployment and US Foreign Direct Investment. International Studies Quarterly 51 (4):835854.Google Scholar
Boix, Carles. 2008. Economic Roots of Civil Wars and Revolutions in the Contemporary World. World Politics 60 (3):390437.Google Scholar
Bracke, Maud. 2007. Which Socialism, Which Detente?: West European Communism and the Czechoslovak Crisis of 1968. Budapest: Central European University Press.Google Scholar
Bresnahan, Timothy F., and Reiss, Peter C.. 1991. Entry and Competition in Concentrated Markets. Journal of Political Economy 99 (5):9771009.CrossRefGoogle Scholar
Bueno de Mesquita, Bruce, and Downs, George W.. 2006. Intervention and Democracy. International Organization 60 (3):627649.Google Scholar
Bureau of the Census. 1905–1946. Foreign Commerce and Navigation of the United States. Washington, DC: US Government Printing Office.Google Scholar
Byman, Daniel L., and Pollack, Kenneth M.. 2001. Let Us Now Praise Great Men: Bringing the Statesman Back In. International Security 25 (4):107146.CrossRefGoogle Scholar
Carneiro, Anabela, Guimarães, Paulo, and Portugal, Pedro. 2012. Real Wages and the Business Cycle: Accounting for Worker, Firm, and Job Title Heterogeneity. American Economic Journal: Macroeconomics 4 (2):133152.Google Scholar
Chiozza, Giacomo, and Goemans, H.E.. 2011. Leaders and International Conflict. New York: Cambridge University Press.CrossRefGoogle Scholar
CIA. 1970. Richard Helms Handwritten Notes, “Meeting with the President on Chile at 1525.” September 15.Google Scholar
CIA. 2014. CIA World Fact Book, technical report, CIA, Guatemala.Google Scholar
Collier, Paul, and Hoeffler, Anke. 2004. Aid, Policy and Growth in Post-Conflict Societies. European Economic Review 48 (5):11251145.Google Scholar
Comisión de Publicaciones. 1994. Panama en Cifras: Años 1989–1993. Panama: Dirección de Estadística y Censo.Google Scholar
Disdier, Anne-Célia, and Head, Keith. 2008. The Puzzling Persistence of the Distance Effect on Bilateral Trade. Review of Economics and Statistics 90 (1):3748.CrossRefGoogle Scholar
Dominguez, Jorge. 2007. International Cooperation in Latin America: The Design of Rational Institutions by Slow Accretion. In Crafting Cooperation: Regional International Institutions in Comparative Perspective, edited by Amitav Acharya and Alistair Iain Johnston, 83128. New York: Cambridge University Press.Google Scholar
Downes, Alexander B. 2012. Decapitation by FIRC: Foreign-Imposed Regime Change and the Fate of Leaders. Paper Presented at the Annual Meeting of the International Studies Association, San Diego, CA, April.Google Scholar
Downes, Alexander B. 2013. Catastrophic Success: Foreign-Imposed Regime Change and Civil War. Working paper. Washington, DC: George Washington University.Google Scholar
Downes, Alexander B., and Monten, Jonathan. 2013. Forced to be Free: Why Foreign-Imposed Regime Change Rarely Leads to Democratization. International Security 37 (4):90131.Google Scholar
Downes, Alexander B., and Sechser, Todd S.. 2012. The Illusion of Democratic Credibility. International Organization 66 (3):457489.Google Scholar
Drezner, Daniel W. 1998. The Sanctions Paradox: Economic Statecraft and International Relations. New York: Cambridge University Press.Google Scholar
Dupont, William, and Plummer, Dale. 2005. Using Stata v9 to Model Complex Non-Linear Relationships with Restricted Cubic Splines. Paper presented at the Annual Meeting of the North American Stata Users’ Group, Boston, MA, July.Google Scholar
Durrleman, Sylvain, and Simon, Richard. 1989. Flexible Regression Models with Cubic Splines. Statistics in Medicine 8 (5):551561.Google Scholar
Eckstein, Harry. 1975. Case Studies and Theory in Political Science. In Handbook of Political Science, Vol. 7: Strategies of Inquiry, edited by Fred I Greenstein and Nelson W. Polsby, 94137. Reading, MA: Addison-Wesley.Google Scholar
Fazal, Tanisha M. 2007. State Death: The Politics and Geography of Conquest, Occupation, and Annexation. Princeton, NJ: Princeton University Press.Google Scholar
Federal Reserve Bank of Minneapolis. ND. Consumer Price Index (Estimate) 1800-. Available from https://www.minneapolisfed.org/community/teaching-aids/cpi-calculator-information/consumer-price-index-1800, accessed 17 June 2015.Google Scholar
Federico, Giovanni, and Tena, Antonio. 1991. On the Accuracy of Foreign Trade Statistics (1909-1935): Morgenstern Revisited. Explorations in Economic History 28 (3):259273.CrossRefGoogle Scholar
Finn, Janet L. 1998. Tracing the Veins: Of Copper, Culture, and Community from Butte to Chuquicamata. Berkeley: University of California Press.Google Scholar
Gleijeses, Piero. 1992. Shattered Hope: The Guatemalan Revolution and the United States, 1944-1954. Princeton, NJ: Princeton University Press.Google Scholar
Gobat, Michel. 2005. Confronting the American Dream: Nicaragua Under U.S. Imperial Rule. Durham, NC: Duke University Press.Google Scholar
Goemans, H.E., Gleditsch, Kristian Skrede, and Chiozza, Giacomo. 2009. Archigos: A Data Set on Leaders 1875-2004. Version 2.9. Rochester, NY: University of Rochester.Google Scholar
Goldstein, Judith L., Rivers, Douglas, and Tomz, Michael. 2007. Institutions in International Relations: Understanding the Effects of the GATT and the WTO on World Trade. International Organization 61 (1):3767.Google Scholar
Gowa, Joanne, and Mansfield, Edward D.. 2004. Alliances, Imperfect Markets, and Major-Power Trade. International Organization 58 (4):775805.CrossRefGoogle Scholar
Green, Donald P., Kim, Soo Yeon, and Yoon, David H.. 2001. Dirty Pool. International Organization 55 (2):441468.Google Scholar
Greenspan, Alan. 2008. The Age of Turbulence: Adventures in a New World. New York: Penguin.Google Scholar
Grow, Michael. 2008. U.S. Presidents and Latin American Interventions: Pursuing Regime Change in the Cold War. Lawrence: University Press of Kansas.Google Scholar
Hoeffler, Anke. 2008. Dealing with the Consequences of Violent Conflicts in Africa, background paper for the African Development Bank Report, University of Oxford. Available at http://users.ox.ac.uk/~ball0144/consequences.pdf, accessed 17 June 2015.Google Scholar
Hufbauer, Gary Clyde, Schott, Jeffrey J., and Elliott, Kimberly Ann. 2009. Economic Sanctions Reconsidered, 3rd Edition. Washington, DC: Peterson Institute for International Economics.Google Scholar
Human Rights Watch. 2012. World Report, technical report, Guatemala.Google Scholar
Immerman, Richard H. 1982. The CIA in Guatemala: The Foreign Policy of Intervention. Austin: University of Texas Press.Google Scholar
Kerevel, Yann. 2006. Re-Examining the Politics of U.S. Intervention in Early 20th Century Nicaragua: José Madriz and the Conservative Restoration. University of New Mexico: Latin American Institute.Google Scholar
King, Gary, Honaker, James, Joseph, Anne, and Scheve, Kenneth. 1998. Listwise Deletion is Evil: What to Do About Missing Data in Political Science. Working paper. Cambridge, MA: Harvard University.Google Scholar
Kinzer, Stephen. 2006. Overthrow: America’s Century of Regime Change from Hawaii to Iraq. New York: Times Books.Google Scholar
Kinzer, Stephen. 2013. Latin America Sees US Diverting Morales’ Plane as Yankee Imperialism. The Guardian, 5 July.Google Scholar
Lo, Nigel, Hashimoto, Barry, and Reiter, Dan. 2008. Ensuring Peace: Foreign-Imposed Regime Change and Post-War Peace Duration, 1914-2001. International Organization 62 (4):717736.CrossRefGoogle Scholar
Lohmann, Susanne, and O’Halloran, Sharyn. 1994. Divided Government and U.S. Trade Policy: Theory and Evidence. International Organization 48 (4):595632.Google Scholar
Long, Andrew G., and Leeds, Brett Ashley. 2006. Trading for Security: Military Alliances and Economic Agreements. Journal of Peace Research 43 (4):433451.Google Scholar
Maddison, Angus. 1995. Monitoring the World Economy, 1820-1992. Paris: Development Centre of the Organisation for Economic Co-Operation and Development.Google Scholar
Mansfield, Edward D., Milner, Helen V., and Rosendorff, B. Peter. 2000. Free to Trade: Democracies, Autocracies, and International Trade. American Political Science Review 94 (2):305321.Google Scholar
Marcy, William. 2010. The Politics of Cocaine: How U. S. Foreign Policy has Created a Thriving Drug Industry in Central and South America. Chicago, IL: Chicago Review Press.Google Scholar
Markusen, James R., and Venables, Anthony J.. 1998. Multinational Firms and the New Trade Theory. Journal of International Economics 46 (2):183203.Google Scholar
Mátyás, László. 1997. Proper Econometric Specification of the Gravity Model. The World Economy 20 (3):363368.Google Scholar
Mearsheimer, John J., and Walt, Stephen M.. 2007. The Israel Lobby and U.S. Foreign Policy. New York: Farrar, Straus and Giroux.Google Scholar
National Security Council. 1970. Response to NSSM [National Security Study Memorandum] 97, 18 August.Google Scholar
New York Times . 1989. Fighting in Panama: The President; a Transcript of Bush’s Address on the Decision to Use Force in Panama, 20 December.Google Scholar
OECD StatExtracts. 2015. Foreign Direct Investment, available at http://stats.oecd.org/, accessed 17 June 2015.Google Scholar
Pape, Robert A. 1997. Why Economic Sanctions Do Not Work. International Security 24 (2):90136.Google Scholar
Peic, Goran, and Reiter, Dan. 2011. Foreign-Imposed Regime Change, State Power, and Civil War Onset, 1920-2004. British Journal of Political Science 41 (3):453475.Google Scholar
Pollins, Brian M. 1989. Conflict, Cooperation, and Commerce: The Effect of International Political Interactions on Bilateral Trade Flows. American Journal of Political Science 33 (3):737761.Google Scholar
Qureshi, Lubna Z. 2009. Nixon, Kissinger, and Allende: U.S. Involvement in the 1973 Coup in Chile. Lanham, MD: Lexington Books.Google Scholar
Rogowski, Ronald. 1987. Trade and the Variety of Democratic Institutions. International Organization 41 (2):203223.Google Scholar
RT Business. 2014. Iraq Exodus? Oil Majors Withdraw Staff as Terror Threat Rises, 19 June. Available at http://rt.com/business/167004-foreign-oil-evacuate-iraq/, accessed 4 February 2015.Google Scholar
Saunders, Elizabeth N. 2011. Leaders at War: How Presidents Shape Military Interventions. Ithaca, NY: Cornell University Press.Google Scholar
Schlesinger, Stephen, and Kinzer, Stephen. 1999. Bitter Fruit: The Story of the American Coup in Guatemala, expanded edition. Cambridge, MA: Harvard University Press.Google Scholar
Streeter, Stephen M. 2000. Managing the Counterrevolution: The United States and Guatemala, 1954-1961. Athens: Ohio University Center for International Studies.Google Scholar
The White House. 1970. Memorandum of Conversation-NSC Meeting-Chile (NSSM 97), 6 November.Google Scholar
Tomz, Michael. 2007. Domestic Audience Costs in International Relations: An Experimental Approach. International Organization 61 (4):821840.Google Scholar
Tomz, Michael, Goldstein, Judith L., and Rivers, Douglas. 2007. Do We Really Know that the WTO Increases Trade? Comment. American Economic Review 97 (5):20052018.CrossRefGoogle Scholar
U.S. Census Bureau. 1891–2012. Statistical Abstract of the United States, 131st Edition, Vol. 1. Washington, DC: US Census Bureau.Google Scholar
Voeten, Erik, and Brewer, Paul R.. 2006. Public Opinion, the War in Iraq, and Presidential Accountability. Journal of Conflict Resolution 50 (6):809830.Google Scholar
Wolford, Scott. 2007. The Turnover Trap: New Leaders, Reputation, and International Conflict. American Journal of Political Science 51 (4):772788.Google Scholar
Yates, Lawrence A. 2012. The U.S. Military Intervention in Panama: Origins, Planning, and Crisis Management, June 1987-December 1989. Washington, DC: Government Printing Office.Google Scholar
Yu, Miaojie. 2010. Trade, Democracy, and the Gravity Equation. Journal of Development Economics 91 (2):289300.CrossRefGoogle Scholar
Supplementary material: PDF

Zachary supplementary material

Appendix

Download Zachary supplementary material(PDF)
PDF 535.7 KB