The economic and political motivations for negotiating trade agreements (z.B Tarlea 2018) have caused a great deal of attention. While governments negotiate trade agreements for economic reasons, they also have geopolitical motivations. Geopolitical alliances, on the other hand, strengthen trade relations. But not everyone agrees on the importance of these links. Baldwin and Jaimovich (2012), for example, conclude that geopolitical factors play no role in trade agreements. Figure 1 Evolution in the number of trade agreements, 1871-1913 We provide a tilt assessment that compares the average treatment effect between the countries of the defence pact. In addition, we use an instrument for military alliances: diplomatic representation, that is, the presence and rank of diplomats of a nation of origin in the host country. The presence of diplomats plausibly contributes to forging or maintaining international agreements and is therefore positively correlated with military alliances. Diplomatic representation is unlikely to be linked to other trade agreements during this period. Governments have sent accredited diplomats or diplomats on the basis of general foreign policy considerations, not primarily to directly influence trade relations.
But to be sure, we have calculated the residues from a regression of diplomatic presence and we rank according to standard arguments of the gravity model, including distance, isolation, contiguity, common language and common colonial relations. This provides a measure for diplomatic representation, which is orthogonal for trade frictions. Tags: Geopolitics, defence alliances, trade agreements, NATO March or Mercury redux: The geopolitics of bilateral trade agreements We analyze 271 bilateral trade agreements between 44 countries during the period 1871-1913. We measure financial factors from covariate models of gravity and geopolitical motivations from military alliances, including defence pacts, non-attack contracts, neutrality contracts and agreements. The only bilateral alliance measure that is still important is defence agreements. This contrasts with less ambitious agreements, such as non-aggression contracts, treaties and neutrality treaties. Clearly, only the highest level of commitment of the military alliance influences the conclusion of a trade agreement. In other words, it is only by investing heavily in their geopolitical relations that the likelihood of a trade agreement will increase.
This reflects the results of Long (2003), which found that defence pacts are linked to a greater volume of trade between alliance members, but that trade between members of non-defensive pacts, such as neutrality or non-aggression agreements, cannot statistically be distinguished from trade between non-allies. Figure 2 Estimated Probability of a Trade Agreement – The United States and its NATO Allies Figure 3 shows the difference between the two probabilities in Figure 2. The smallest decrease in the relative probability for Canada is about 20%. Proximity means low trade costs and significant trade benefits for these neighbouring countries. As a result, economic considerations encourage the signing of bilateral trade agreements, whether or not they are reinforced by geopolitical considerations.