(Page 9 of 38) - Hegemony`s Effect on Interstate Trade: Leveling the Playing Field - or the Rich Get Richer While the Poor Get Poorer? authored by Sacko, David. and Jungblut, Bernadette.

attempted to test the effects of hegemony on both security and economic matters, much work – both
theoretical and empirical – remains to be done before we will fully understand the effects of hegemony on,
for our immediate purposes, international trade.

Michael Webb and Stephen Krasner (1989) provided the most descriptively statistically grounded

treatment of hegemonic stability theory to date. Their formulation is largely economic; they all but exclude
the provision of international security stability. For them, “(t)he basic contention of the hegemonic stability
thesis is that the distribution of power among states is the primary determinant of the character of the
international economic system. A hegemonic distribution of power, defined as one in which a single state
has a predominance of power, is most conducive to the establishment of a stable, open international
economic system.” (1989, emphasis added) Webb and Krasner's method of analysis is primarily a
comparison of descriptive statistics. Their dependent variable, ‘liberalization’, is operationalized by
various means. First, they analyze the temporal changes in total world trade (exports only), world
industrial output, and elasticity. They also analyze the trend in trade openness, measured as imports plus
exports as a percentage of Gross Domestic Product. Lastly, they analyze the incidence of non-tariff
barriers by certain countries.

Webb and Krasner's independent variables were as follows: 1) the relative aggregate size of the

United States’ economy, 2) the relative income per capita of the United States, 3) relative United States’
growth rates, 4) relative United States’ world trade, 5) the United States’ share of international investment;
and 6) US shares of world monetary reserves. Webb and Krasner's study had several deficiencies. First,
they propose and proceed to indicate various operationalizations. Statistics were compiled but not
systematically assessed. There was no method of inferential statistics employed. They have eight tables of
interesting statistics. Each table, however, has different countries and different time points. This prevents
any reasonable comparison across the tables. Furthermore, the operationalizations they utilized for the
independent variables are largely co-linear and therefore, problematic. In sum, it is difficult to determine
what we can conclude about hegemony’s effects on international trade from this analysis.

Edward Mansfield (1992a, 1994) has provided the most rigorous and provocative analysis of

hegemonic stability and its effects on international trade. Mansfield attempted to integrate the seemingly
contradictory arguments concerning the direction of the relationship between trade and hegemony. He
proposed the possibility of a U-shaped, curvilinear relationship between real global trade levels and
capability concentration. (1992a; 1994). Capability concentration is an index measure of the dispersion of
power among the international system’s major powers (Ray and Singer, 1973). Low levels of
concentration will provide little incentive for states to engage in protection; consequently, an open trading
system will result. Mansfield found that hegemony (coded as a dummy variable) is positively associated
with increased levels of real trade from 1860 to 1965. He reports a strong positive association between the
presence of a hegemonic state and higher levels of trade, again, along with a U-shaped relationship between
capability concentration and trade levels.

As Conybeare suggests (1984), as one hegemon or a small number of major states become

increasingly powerful, their ability to influence the terms of trade will increase and they will be able to
impose an optimal tariff. Thus, as capability concentration increases, the level of trade should decrease as
the system becomes more closed due to optimal tariffs. However, beyond some point, a non-myopic
hegemon will enforce an open trading system in order to “maintain its monopoly power in the international
economy.” (Mansfield 1992a: 743) The imposition of optimal tariffs would tend to encourage other states
to adjust world markets in ways that would eventually erode the hegemon's market power. A hegemon
may have political reasons for maintaining an open international economy. This is the argument behind
Mansfield and Gowa's (1993) suggestion that security externalities cause powerful states, including a
hegemon, to foster high levels of intra-alliance trade while discouraging inter-alliance trade. Again, we
have findings that support competing predictions for hegemonic (or, more properly, power
capability/concentration) effects on international trade.

It is important to note that the concentration of capabilities across the system reflects the

distribution of all major powers, not just the hegemon's relationship to the system. Hegemonic stability