Hegemony theory and tariff levels 77 power could successfully coerce less developed countries,isolated both geo- graphically and diplomatically from potential allies,then most students of international politics would correctly conclude that they were being offered nothing more substantial than a rather uninteresting prediction based on a standard"power"theory ofinternational outcomes.Clearly,the critical chal- lenge to the hegemonic state is to win the adherence of its important rivals to the open system;the challenge to hegemonic stability theory is to explain how the hegemonic state manages this victory. Krasner's argument relies primarily on"potential economic power"as the basis of the hegemonic state's success in securing compliance with an open trading system.In his words,military force is not likely to play much of a role in this process since it is a "not very efficient"tool for altering the economic policies of other states and is "unlikely to be employed against medium-size states"in any event.But if military force can only be used successfully against some less developed countries,then economic "power" must be the primary lever used against the larger,more important states. The difficulty here is that if the term "economic power"is to have any meaning that is not already captured by economists'notions of ability to pay and"effective demand,"it must refer to the threatened or actual delivery of negative payoffs to the policy's target.Otherwise,the discussion ofeconomic "power"essentially becomes a discussion of economic bribery:how much is the hegemonic state willing to pay others to secure their adherence to an open regime?While this may be an interesting question and while one may choose to define"power"to include the ability to distribute positive payoffs, the fact remains that equating bribery with"power"simply renames rather than explains the phenomenon. Krasner considers two examples of the use of negative economic power, one of which,the withholding of foreign aid,he chooses with the particular recent behavior of the United States in mind.The other example,competing with the target country in third-country markets,does not seem apposite inasmuch as it is firms that decide in a capitalist state where to sell com- modities.2 Do states actually threaten other states with "competition"in foreign markets?Or do they promise to blunt the competitive activities of their country's firms in those markets in order to secure concessions on tariff policy?Such events seem extremely unlikely,and Krasner provides no reason to make us believe otherwise. There is,however,a much more potent and historically relevant weapon of economic "power"available to the hegemonic state:it can threaten to cut off one nation's access to its rich home market while allowing other nations continued access to that market.Threatening to raise tariffs unless 11.bid,p.322. 12.A partial exception to this is to be found in those cases where a decision not to sell,i.e., an embargo or some form of voluntary export restraint,has been imposed by the state
Hegemony theory and tariff levels 77 power could successfully coerce less developed countries, isolated both geographically and diplomatically from potential allies, then most students of international politics would correctly conclude that they were being offered nothing more substantial than a rather uninteresting prediction based on a standard "power" theory of international outcomes. Clearly, the critical challenge to the hegemonic state is to win the adherence of its important rivals to the open system; the challenge to hegemonic stability theory is to explain how the hegemonic state manages this victory. Krasner's argument relies primarily on "potential economic power" as the basis of the hegemonic state's success in securing compliance with an open trading system. In his words, military force is not likely to play much of a role in this process since it is a "not very efficient" tool for altering the economic policies of other states and is "unlikely to be employed against medium-size states" in any event." But if military force can only be used successfully against some less developed countries, then economic "power" must be the primary lever used against the larger, more important states. The difficulty here is that if the term "economic power" is to have any meaning that is not already captured by economists' notions of ability to pay and "effective demand," it must refer to the threatened or actual delivery of negative payoffs to the policy's target. Otherwise, the discussion of economic "power" essentially becomes a discussion of economic bribery: how much is the hegemonic state willing to pay others to secure their adherence to an open regime? While this may be an interesting question and while one may choose to define "power" to include the ability to distribute positive payoffs, the fact remains that equating bribery with "power" simply renames rather than explains the phenomenon. Krasner considers two examples of the use of negative economic power, one of which, the withholding of foreign aid, he chooses with the particular recent behavior of the United States in mind. The other example, competing with the target country in third-country markets, does not seem apposite inasmuch as it is firms that decide in a capitalist state where to sell commodities.12 Do states actually threaten other states with "competition" in foreign markets? Or do they promise to blunt the competitive activities of their country's firms in those markets in order to secure concessions on tariff policy? Such events seem extremely unlikely, and Krasner provides no reason to make us believe otherwise. There is, however, a much more potent and historically relevant weapon of economic "power" available to the hegemonic state: it can threaten to cut off one nation's access to its rich home market while allowing other nations continued access to that market. Threatening to raise tariffs unless 11. Ibid., p. 322. 12. A partial exception to this is to be found in those cases where a decision not to sell, i.e., an embargo or some form of voluntary export restraint, has been imposed by the state
78 International Organization the target state lowers its own is clearly a coercive policy,even when it is coupled to the"carrot"of preferential access to the hegemonic state's own market in exchange for the target state's tariff concessions.This strategy would seem to be quite attractive to a hegemonic state.By negotiating with other countries in a series of bilateral negotiations rather than in a multilateral setting,it reduces the possibility that nonhegemonic states will cooperate against it,and takes full advantage of the opportunities to play off the weaker states against one another.The selective awarding of access to the home market husbands the hegemonic state's "bargaining chips"and precludes spectators from taking a free ride on the target country's concessions to the hegemonic state (obtaining access to the hegemonic state's home market on the same favorable terms without having to pay any "price"in the form of tariff reductions).Such a policy is also consistent with what Hirschman terms a "power"policy in commercial relations:the deliberate fostering of trade with those states that are most vulnerable to subsequent manipulation via the exploitation of asymmetrical and unequal dependencies created by such trade.13 However,the larger and more developed the target state is,the costlier will be the short-term sacrifices in the dominant state's welfare re- quired to establish the dependency pattern.(Larger,more developed states may not be subject to entrapment in such dependency relations at any price if there is no influential domestic political interest strongly tied to continuing commercial relations with the dominant country;if there is no small group of products that alone earn foreign exchange;if geography does not constrain the choice of trading partners;and if military or other noneconomic influences can be successfully resisted.) Thus,if Krasner's assessment of the role of military force in regime change is correct,the "power"'of the hegemonic state is essentially economic power in an oligopolistic setting.Again,this is not an empty conclusion,but it is quite a departure from traditional balance-of-power arguments about the centrality of military force in the achievement of national objectives. A fourth difficulty with hegemonic stability theory lies in its treatment of regimes as collective goods.While it is true that in large-number (i.e.,com- petitive)situations it has been suggested that"coercion or some other special device"is necessary for the good to be supplied,4 it does not seem very sensible to view the international system as isomorphic with an economic system of perfect competition.Table 1 shows shares of total world trade held by various states and regions in the 19th century.If we consider just the four leaders-France,Great Britain,Germany,and the United States- we find that their total share of world trade was 48 percent in 1850;by 1913 they still accounted for 46 percent.(If we add to these totals the trade of 13.A.O.Hirschman,National Power and the Structure of Foreign Trade(Berkeley:University of California Press,1945). 14.M.Olson,The Logic of Collective Action (New York:Schocken,1968),p..2
78 International Organization the target state lowers its own is clearly a coercive policy, even when it is coupled to the "carrot" of preferential access to the hegemonic state's own market in exchange for the target state's tariff concessions. This strategy would seem to be quite attractive to a hegemonic state. By negotiating with other countries in a series of bilateral negotiations rather than in a multilateral setting, it reduces the possibility that nonhegemonic states will cooperate against it, and takes full advantage of the opportunities to play off the weaker states against one another. The selective awarding of access to the home market husbands the hegemonic state's "bargaining chips" and precludes spectators from taking a free ride on the target country's concessions to the hegemonic state (obtaining access to the hegemonic state's home market on the same favorable terms without having to pay any "price" in the form of tariff reductions). Such a policy is also consistent with what Hirschman terms a "power" policy in commercial relations: the deliberate fostering of trade with those states that are most vulnerable to subsequent manipulation via the exploitation of asymmetrical and unequal dependencies created by such trade.13 However, the larger and more developed the target state is, the costlier will be the short-term sacrifices in the dominant state's welfare required to establish the dependency pattern. (Larger, more developed states may not be subject to entrapment in such dependency relations at any price if there is no influential domestic political interest strongly tied to continuing commercial relations with the dominant country; if there is no small group of products that alone earn foreign exchange; if geography does not constrain the choice of trading partners; and if military or other noneconomic influences can be successfully resisted.) Thus, if Krasner's assessment of the role of military force in regime change is correct, the "power" of the hegemonic state is essentially economic power in an oligopolistic setting. Again, this is not an empty conclusion, but it is quite a departure from traditional balance-of-power arguments about the centrality of military force in the achievement of national objectives. A fourth difficulty with hegemonic stability theory lies in its treatment of regimes as collective goods. While it is true that in large-number (i.e., competitive) situations it has been suggested that "coercion or some other special device" is necessary for the good to be supplied,14 it does not seem very sensible to view the international system as isomorphic with an economic system of perfect competition. Table 1 shows shares of total world trade held by various states and regions in the 19th century. If we consider just the four leaders-France, Great Britain, Germany, and the United Stateswe find that their total share of world trade was 48 percent in 1850; by 19 13 they still accounted for 46 percent. (If we add to these totals the trade of 13. A. 0.Hirschrnan, National Power and theStructureofForeign Trade(Berke1ey: University of California Press, 1945). 14. M. Olson, The Logic of Collective Action (New York: Schocken, 1968), p. 2
Hegemony theory and tariff levels 79 TABLE 1.Percentage distribution of world trade by states and regions, 1850-1913 1850 1870 1890 1913 Great Britain 22 25 22 16 France 11 10 9 > Germany 6 10 11 12 Other Europe 28 27 27 29 United States 8 9 11 Latin America 8 6 5 8 British Colonies 10 13 18 Other 7 4 4 Source:W.W.Rostow,The World Economy:History and Prospect(Austin:University of Texas Press,1978),Table II-8.Due to rounding,not all columns total 100%. British colonies,the respective percentages would rise to 57%and about 56%.)The international trading system thus exhibited a fair amount of con- centration in the economist's sense.'5 If this judgment is accepted,then arguments concerning the necessary conditions for the supply of collective goods in large-number systems are simply irrelevant.As Olson notes,in small-number (i.e.,oligopolistic)systems the members "can provide them- selves with collective goods without relying on any positive inducements apart from the good itself."6 This conclusion implies that the presence of a hegemonic state is not a necessary condition (though it still may be a sufficient one)for the emergence of open economic regimes in such an oli- gopolistic system. The final difficulty faced by hegemonic stability theory is one that it shares with power theories in general-a lack of attention to theoretical prediction or empirical examination of the process whereby the hegemonic state does or does not achieve open regimes.In the words of a standard text on modeling in the social sciences,the theory of hegemonic stability has a poor "sense of process."7 It is not very helpful in telling us what actors did in order for a system to move from point A to point B.The linkage between shifts in capabilities and shifts in regimes or other outcomes is inferred by noting 15.If we considered the trade of those states that had lost tariff autonomy-China,the Ottoman Empire,certain Latin American states-the total would be even higher,but the dem- onstration of control from the core is more problematic than in the case of formal colonies. 16.Olson,Logic of Collective Action,p.33. 17.C.A.Lave and J.G.March,An Introduction to Models in the Social Sciences (New York:Harper Row,1975)
Hegemony theory and tariff levels 79 TABLE 1. Percentage distribution of world trade by states and regions, 1850-1913 Great Britain 22 2 5 22 16 France 11 10 9 7 Germany 8 10 11 12 Other Europe 28 27 27 29 United States 7 8 9 11 Latin America 8 6 5 8 British Colonies 9 10 13 Other 7 4 4 Source: W. W. Rostow, The World Economy: History and Prospect (Austin: University of Texas Press, 1978), Table 11-8. Due to rounding, not all columns total 100%. British colonies, the respective percentages would rise to 57% and about 56O/o.) The international trading system thus exhibited a fair amount of concentration in the economist's sense.15 If this judgment is accepted, then arguments concerning the necessary conditions for the supply of collective goods in large-number systems are simply irrelevant. As Olson notes, in small-number (i.e., oligopolistic) systems the members "can provide themselves with collective goods without relying on any positive inducements apart from the good itself."16 This conclusion implies that the presence of a hegemonic state is not a necessary condition (though it still may be a sufficient one) for the emergence of open economic regimes in such an oligopolistic system. The final difficulty faced by hegemonic stability theory is one that it shares with power theories in general-a lack of attention to theoretical prediction or empirical examination of the process whereby the hegemonic state does or does not achieve open regimes. In the words of a standard text on modeling in the social sciences, the theory of hegemonic stability has a poor "sense of process."17 It is not very helpful in telling us what actors did in order for a system to move from point A to point B. The linkage between shifts in capabilities and shifts in regimes or other outcomes is inferred by noting 15. If we considered the trade of those states that had lost tariff autonomy-China, the Ottoman Empire, certain Latin American states-the total would be even higher, but the demonstration of control from the core is more problematic than in the case of formal colonies. 16. Olson, Logic of Collective Action, p. 33. 17. C. A. Lave and J. G. March, An Introduction to Models in the Social Sciences (New York: Harper & Row, 1975)