Norris-International Relations Capstone 2016-2

Making the World Safe for Trade: The Link Between Security Agreements
and
Trade Flows
Stephen Norris
PubAdm 691: Global Governance
Professor Ursula Tafe
The Department of International Relations
The McCormack School of Conflict Resolution, Human Security, and Global Governance
The University of Massachusetts-Boston
May 19, 2016

Norris 1
ABSTRACT
A common assertion made within the current academic literature regarding trade is that allied
states tend to make better trading partners than non-allied states. This assertion has been used to
tie security initiatives and economic agreements. Past discussions of the relationship have been
made in the context of NATO during the Cold War. This report attempts to review US trade in the
post-Cold War era from 1990-2014. Specifically, it will review the United States’ trade flows
between allies and non-allies in South East Asia using the gravity model of international trade and
a longitudinal regression through STATA. In addition, it applies a similar model to 12 random
states from the global population in order to determine if regional trends translate to global trends.
The test conducted in this study that over the long-term, alliances have a significant positive effect
on bilateral trade value.

Norris 2
TABLE OF CONTENTS
SECTION PAGE
Abstract 1
Table of Contents 2
Acronym Page 3
Introduction 4
Background and Broader Context 5
Methodology 8
Theoretical/Conceptual Perspective 12
Main Body 21
Main Findings 28
Policy Recommendations 49
Discussions and Shortcomings 50
Conclusion 51
Acknowledgments 52
Bibliography 53
Appendix 57

Norris 3
Acronym Page
NATO: North Atlantic Treaty Organization
IMF: International Monetary Fund
WTO: World Trade Organization
UN: United Nation
BRICS: Brazil, Russia, India, China, South Africa
TPP: Trans Pacific Partnership
T-TIP: Transatlantic Trade and Investment Partnership
FDI: Foreign Direct Investment
PG: Public Goods

Norris 4
INTRODUCTION
One needs to look no further than the homepages of Foreign Affairs or The Diplomat to
be alerted to the escalation of tensions around the world. Western Europe is confronted with an
adventurous Russia in Eastern Europe, the Middle East is mired in perpetual crisis, and the Far
East finds itself on the precipice of a reordering of the regional power structure. While these
areas are politically diverse of and between themselves and separated by vast distances, they fall
within the imperatives of the American grand strategy for international order. As the preeminent
hegemonic power, it is within the purview of American interests to address these concerns in
order to preserve its power within the international community. At the core of these concerns is
the preservation of American security and wealth, as well as the maintenance of the American
led liberal hegemonic order.
Among the many tools at the disposal of the United States to address such issues is its
vast security apparatus. While sometimes pejoratively referred to as an empire, the American
network of strategic partners and allies has helped underwrite its political, military, and
economic hegemony since the end of World War II. American power has been greatly assisted
by its ability to foster relationships and establish governance intuitions – such as NATO, IMF,
UN, WTO, and the World Bank Group- which have been used to promote American goals.
Indeed, the rise of BRICS states and other emerging states has openly challenged the current
governance regime and criticized it as too American and not representational in terms of ideas,
recognition, and distribution of member power. Nonetheless, such governance organizations
produce collective public goods – even if they are distributed unevenly.

Norris 5
Such institutions form the backbone of American power, and while American interests in
them are described differently depending on one’s ontological position, it is clear that the public
goods they produced are used to an end that satiates an American grand strategy. However, it is
important to note that the public goods produced by them are not an end to themselves. For
example NATO provides the public good of security for its member states and this security
guarantee allows states to focus on issues such as trade, finance, and other economic interests.
This assertion – that security agreements underwrite trade activity - forms the foundation for this
paper. In short it is argued that states that are party to a security agreement with the United States
are more likely to trade a greater volume of goods and services with the United States than non-
member states.
This paper is broken up into multiple sections. The first section explores the main themes
and broader concepts linked to this research. Furthermore this section includes some background
information for readers to contextualize the importance of this research. The second section
details the proposed methodology for the paper and provides a brief explanation of the data
sources as well as why particular variables were chosen. This section also contains a subsection
which serves as both a description of the gravity model and as a bridge to section four, the
literature review. Section three is broken into multiple subsections. The first subsection provides
a survey on the current academic literature regarding the gravity model. It focuses heavily on the
current debate regarding the theoretical underpinnings and assertions of biases within the model.
The second subsection provides a survey regarding the academic discourse related to public
goods. Finally, the third subsection focuses on the relationship between trade and security
agreements.

Norris 5
Section five will include the basic descriptive data that provides evidence for a correlation
between alliances and trade value. Specifically the section illustrates the US trade relationship
with states from the two sample groups the hypotheses are tested against. Section six is
comprised of the main findings of the report and contains numerous charts, data, descriptive and
analytical statistics. An interpretation of the data is also be included.
Sections seven, eight, and nine serve as the concluding sections and provide a deeper
interpretation of the data than in previous sections. Furthermore section seven specifically details
policy recommendations and ramifications based on the findings of the hypothesis tests. Section
eight provides a brief discussion about the shortcomings of the model, as well as detail where
further research should be directed. Specifically, this section touches upon the need for greater
research into the “spill over” effect of security agreements. Finally the paper concludes with
acknowledgements and a bibliography.
BACKGROUND AND BROADER CONTEXT
Public goods within the context of security agreements are extensively written upon,
especially in regards to member state defense outlays and public security goods within collective
security organizations like NATO. Of note, there is a field of study that evaluates non-security
public goods generated by security arrangements. Specifically, efforts have been made to craft an
economic theory of alliances – which theorizes that states that are engaged in a security
arraignment will naturally become trading partners. This has clear historical precedent especially
in the post-World War II period with the development of functionalist/neo-functionalist theories.

Norris 6
Essentially, this paper seeks to determine whether the claim that allies make better trading
partners is an accurate statement. Undoubtedly allies like to trade – the security bridge between
them helps facilitate the movement of goods and services as well, and it aids in the
harmonization of their policies. However, a question does emerge: can a non-ally still be a good
trading partner? To answer this, this paper attempts to determine the statistical significance of
security agreements on trade between states.
With respect to its deeper context, this paper is an academic review of the role of
institutions and their ability to generate public goods. Such discussions on this can be found in
literature dedicated to institution building and maintenance, such as (Tollison and Willet 1979;
Sandler and Tshirhar 1980). For example, NATO as an institution generates the public good of
security. As a non-rival, non-excludable good this security mitigates competition among
neighboring club members and permits them to allocate state resources towards other endeavors.
This paper makes several assertions with respect to the United States. First, it recognizes that the
US security apparatus is so extensive that non-club members actually enjoy a “spill-over” of the
public good of security. As an example, Switzerland is not a member of NATO, however given
its location and proximity to other NATO members, it does enjoy some element of NATO
security.
The paper explores this deeper context through an investigation of the economic benefits
of alliances vis-à-vis bilateral trade flows. This investigation uses two sample groups: a global
random sampling of states; and a sampling of states from the entirety of the Asia-Pacific region.
The former sampling is used to identify whether the aforementioned assertion holds true at a
global level of analysis. The latter sampling was chosen deliberately due American strategic

Norris 7
interest in the region as well as the region’s meteoric rise in economic activity over the past 25
years. If alliances have a significant effect on economic activity, then the region and the
American allies within it will have a profound influence on American grand strategy and policy
for the foreseeable future.
Recent US and allied activity in the region indicate a recognition that the region is a vital
area of interest. The much vaunted Pivot to Asia – or alternatively the Asia-Pacific Rebalance –
is symptomatic of this recognition. Official US government documents contend that the
rebalance to Asia emerges from the recognition that
“A failure to do so could invite other regional powers, particularly China, to shape
the region in ways that are not necessarily in U.S. interests. Arguably, it could also
lead to greater instability as the region adjusts to the shifting correlates of power—
most prominently the rise of China and India—with the potential for regional
confrontation. Indeed, many would argue that the potential costs of inaction
arguably could outweigh the risks of action” (Manyin et al 2012, 7).
There is a clear realist strategic sentiment to the described American interests in the
region. Manyin et al (2012) notes that in order to pursue these interests, the United States
will rely upon its allies – notably Australia and Japan - to reinforce American and allied
military capabilities through the deployment of additional troops and naval assets. Such
actions would revitalize the American alliances and strengthen their deterrence.
The rebalance is not solely fixated on addressing military capacity in the region.
The pivot also include economic initiatives such as the US-South Korea free trade deal
and the Trans-Pacific Partnership. The former entered force in March of 2012, while the
latter has been signed, but has not entered force among its twelve members as of June
2016. The Trans-Pacific Partnership in particular has been pushed by the Obama

Norris 8
administration as an important element of the pivot given its economic and strategic
elements. Indeed, Manyin et al (2012) notes that the agreement would strengthen
intellectual property rights, stimulate US exports, promote shared interests and increase
transit security (Manyin et al 2012, 22). Furthermore TPP has been viewed as a means of
economically containing China. According to Caplin and Ravenhill (2011), “together
with growing concerns about increasing Chinese economic and strategic dominance, the
Obama administration has seized on the TPP as a part of a broader strategy to re-engage
with the region and to contain China’s influence” (Caplin and Ravenhill 2011, 559).
American grand strategy is a factored into the TTP agreement, and this incorporation
clearly highlights the trade-security nexus.
METHODLOGY
In order to investigate the bilateral trade of goods, services and capital flows, this paper
employs the gravity model of international trade in its econometric analysis. The gravity model
has been used by economists since the 1960s, and has been a useful tool in determining the
significance of trading variables (distance, culture, tariffs, free trade agreements, etc). Derived
from Newtonian physics the gravity model can be noted in its iconic form:
𝑭 𝒈 = 𝑮
𝑴 𝟏 𝑴 𝟐
𝒅 𝟐
Where 𝐹𝑔the force of gravity, G is a universal constant, 𝑀1 is the mass of object 1, 𝑀2 is the
mass of a second object, and d is the distance. This formula also establishes the inverse
relationship between distance and force.

Norris 9
A version of the gravity model of international trade is nearly identical – save for the
renaming of a few variables. In its simplest form the gravity model of international trade is noted
as:
𝑿𝒊𝒋 = 𝑨
𝑴𝒊 𝑴𝒋
𝒅𝒊𝒋
In the generalized and multiplicative version of the gravity model of international trade, 𝑋𝑖𝑗
represents trade volume between country i and country j; 𝑀𝑖 is the GDP of country i, 𝑀𝑗 is the
GDP of country j; A is the constant; and 𝑑𝑖𝑗 is the distance between the capitals of country i and
country j. Again this model establishes an inverse relationship between trade volume and
distance – states further apart from one another should have a smaller volume of trade than states
that are adjacent to one another. However, the impact of distance is diminished should the GDP
of either or both states i and j be large. The implication of this relationship is that distance is a
diminished variable of resistance for states with large GDPs.
Clearly there are additional variables beyond distance that affect trade. These variables
can be integrated into the gravity model in order to test their significance. First, this requires that
the gravity model be rewritten in linear form.
𝒍𝒏𝑿𝒊𝒋𝒕 = 𝜷 𝟎 + 𝜷 𝟏 𝐥𝐧(𝑴𝒊𝒕 𝑴𝒋𝒕) − 𝒍𝒏𝒅𝒊𝒋𝒕
This paper will use this form as a basis to determine if security agreements impact the volume of
bilateral trade between the United States and a population of states. The following hypotheses
will be tested:

Norris 10
H1: States with a mutual security agreement with the United States will trade a greater
amount of goods and services than states without a mutual defense agreement
H0: There will be no statistically significant difference in trade value between states that
have a mutual defense agreement with the United States and states that do not
For the purposes of the research paper both bilateral and multilateral security agreements will be
considered in the first set of hypothesis. Trade will be measured in terms of total value of goods,
in terms of percentage of trade in each state, and in a nominal dollar amount.
The next set of hypotheses will test economic benefits in terms of capital flows in a
similar manner.
H2: States with a mutual defense agreement with the United States will have greater
FDI from the US than states without a mutual defense agreement
H0: There will be no statistically significant difference in FDI from the US between states
that have a mutual defense agreement with the United States and states that do
not
Finally, while the term “collective security agreement” is an easily defined legal term, the term
“ally” is not. For example the United States does not have a collective defense treaty with Israel,
Saudi Arabia, or Taiwan – yet all three countries are touted as being among the United States’
closest allies in popular media. Rather all three states – and many others – are recipients of US
military and technical assistance and are important strategic partners. These arraignments are
usually codified in a memo of understanding between governments and exemplified through
Foreign Arm Sales (FMS) through the Defense Security Cooperation Agency. Thus a hypothesis
can formulated with these commonalities.

Norris 11
H3: States that have a memorandum of security/defense with the United States will
trade a greater value of goods with the US than states than states that do not
H0: There will be no statistically significant difference in trade between states that have
memorandum of security/defense with the United States and states that do not
To test these hypotheses, the gravity model is modified to include several dummy variables.
These variables are common language, adjacency to American allied state, a free trade
agreement with the United States, mutual defense/or memorandum of security, and population.
The following model, in conjunction with a longitudinal/panel data regression, will be used to
test the hypotheses:
𝒍𝒏𝑿𝒊𝒋𝒕 = 𝜷 𝟎 + 𝜷 𝟏 𝐥𝐧(𝑴𝒊𝒕 𝑴𝒋𝒕) + 𝜷 𝟐 𝒍𝒏𝒅𝒊𝒋𝒕 + 𝜷 𝟑 𝒍𝒏(𝒑𝒐𝒑𝒊𝒕 ∗ 𝒑𝒐𝒑𝒋𝒕) + 𝜷 𝟒(𝒄𝒐𝒎𝒍𝒂𝒏𝒈)
+ 𝜷 𝟔(𝑭𝑻𝑨 𝒕) + 𝜷 𝟕(𝒔𝒆𝒄𝒖𝒓𝒊𝒕𝒚 𝒓𝒆𝒍𝒂𝒕𝒊𝒐𝒏𝒔𝒉𝒊𝒑 𝒕)
There are two populations of states that are tested by this model. The Group 1 States are from
East Asia/Asia Pacific. This first group is comprised of the following states:
Australia Laos Philippines
Brunei Macau Samoa
Cambodia Malaysia Singapore
China Marshall Islands Solomon Islands
East Timor Mongolia South Korea
Federated States of Micronesia Myanmar Taiwan
Fiji Nauru Thailand
Hong Kong New Zealand Tonga
Indonesia North Korea Tuvalu
Japan Palau Vanuatu
Kiribati Papua New Guinea Vietnam

Norris 12
The Group 2 population is comprised of 12 randomly selected middle income states from around
the world. This group includes the following states:
Chad
Costa Rica
Dominican Republic
Honduras
Italy
Lithuania
Macedonia
Netherlands
New Zealand
Nicaragua
Singapore
Uganda
Bilateral trade and capital flows between the United States and states in Group 1 and Group 2 are
tested on a time series that spans 1990-2014 with data from the World Bank, IMF, and the US
Census Bureau. For political reasons, some states do not have a complete data set for this time
series. For periods in which the US did not have normal political and economic relations with
states there is no data available. In addition there is no data for East Timor prior to its 2001
independence. All data used during the time series is presented in nominal (unadjusted) US
dollar figures, and population data is based on World Bank estimations between government
census surveys.
THEORETICAL AND CONCEPTUAL PERSPECTIVES
In an effort to explore the link between security agreements and their impact on bilateral
trade, several theoretical concepts needed to be consulted. In particular there are three areas of
academic research that need to be drawn upon in order to contextualize the research questions
proposed in this paper. Specifically these areas are the conceptualizations of public goods,
theoretical underpinnings of the gravity equation, and past research that has identified a security-
economy relationship.

Norris 13
Research into the topics and questions presented in this paper stem from an assertion that
allies trade more than non-allies or, alternatively, that allies make better trading partners than
non-allies. The core of this thought is that an alliance regime produces the public goods of
security and deterrence. A review of the literature, starting with Olson and Zeckhauser (1966)
does indicate that there is a natural economic ordering and structuring within alliances based on
the public goods of security. A review of the literature, also indicates that the conceptualization
of public goods is by no means a settled matter.
PUBLIC GOODS
Reviewed academic literature into the conceptualization of public goods indicates that for
a good to be considered public, it must possess the qualities of non-rivalry and non-excludability.
In the context of public goods, it is understood that the quality of non-rivalry means that the use
of the good by one actor does not prevent another actor from utilizing it. The quality of non-
excludability means that all actors are permitted to access and use the public good. While the
parsimonious nature of the definition makes the term easily operationalized, research indicates
that it is insufficient. At its basic form, Burnell (2008) states that, “public goods are goods that
when supplied are necessarily supplied to everybody. They are non-rivalrous in consumption
(consumption by one party leads to no subtraction from any other party’s consumption) and the
benefits are non-exclusionary (non-payers are not denied access): this latter makes free riding
possible” (Burnell 8).
Such a succinct description is considered unsatisfactory by others though. Kaul (2001)
states that there must also be a quality of “publicness” for a good to be a pure public good.

Norris 14
Specifically, it is stated that, “A good’s publicness in form does not automatically imply its
publicness in substance, i.e. a fair and positive outcome for all. Yet publicness in form often
means that people must consume the good. They cannot avoid being affected by it. This holds
true especially in the case of national, and even more so, international PGs. In respect to local
PGs (e.g. parks, school systems, police) people often do have a feasible exit strategy” (Kaul 2001
8-9). For example, within the context of a collective security agreement, all states and their
respective populations must have the same guarantee as their cohorts.
Public goods are understood to exist within the public domain for public consumption
(Kaul and Mendoza 2003 89). Such goods include peace, security, law, order, democracy, and
human welfare – all of which are broad non-tangible concepts. A commonality among all of
them, despite their broad nature, is that they stem in large part from governance structures at all
levels of analysis. However, they do not solely emerge from public-political (i.e. state)
governance structures. Kaul and Mendoza (2003) indicates that public goods are generated
through both the state and markets – each with varying degrees of success depending on the good
provided (Kaul and Mendoza 79). They further conclude that since all peoples operate within a
public domain, all levels of society are dependent on public goods to some degree, and that
public goods compliment private goods (Kaul and Mendoza 79). Weiss (2000) shares a similar
perspective on the conceptualization of public goods, but notes that there are progenitors beyond
the market and the state. Specifically, Weiss (2000) notes that civil society actors such as NGOs
contribute to the promotion of public goods in conjunction with the state and market actors
(Weiss 2000, 801).

Norris 15
With respect to the progenitors, it is clear that public goods have to be created or
protected through a governance regime. Therefore the quality of the public good is contingent
upon the capacity of the governance arrangement that supplies it. Kaul et al (1999) states that if
the institutional capacity to provide the public good is strong enough, there should be some
spillover effect into other areas. Specifically, it is stated: “there are dynamic interlinkages
between the various global public goods. Ensuring an adequate supply of a particular global
public good (or adequate access) will have spillovers in other issue areas. The typical example is
the link between peace and development” (Kaul et al 457). It can be postulated – as this paper
asserts – that this spillover effect is not limited to just peace and democracy, but also to security
and economy.
The spillover issue opens up other areas of debate in academic literature regarding the
conceptualization of public goods. Current literature indicates that while the traditional
parsimonious definition of “non-rivalry, non-excludible” is basically acceptable, it also indicates
that “public goods” is an umbrella term for goods that exhibit such qualities. Global public
goods, for example, are public goods that extend beyond just one group of countries and “do not
discriminate against any population group or any set of generations, present or future (Kaul et al
452). Furthermore, aside from being supplied, such public goods must also be accessible to the
public (Morrissey et al 2002).
Others have conceptualized public goods as an off shoot of “common goods.” Common
good conceptualization includes a more nuanced approach, stating that goods and services are

Norris 16
not purely public or private in part due to the spillover effect – or as some literature notes it,
“externalities.” Holingzer (2003) states,
“The term common goods is used here to denote all goods characterized by the
presence of externalities. This is a very wide definition, expanding to all goods that
are not purely private. Thus, ‘common good’ is a collective noun for a number of sub-
types of common goods, for example pure public goods, common pool resources,
marketable public goods, club goods and network goods. A good belongs to the class
of common goods, whenever it possesses one of the following properties to a certain
degree — non-rivalry in consumption, non-excludability, or positive network
externalities” (Holzinger 175, 2003)
However, others consider this description flawed, especially with respect to club goods and
common pool resources. Schaferhoff et al (2009) indicates that collective goods in the form of
club goods are nonrival and exclusive; and common pool resources can be rivalrous but
nonexclusive (Schaferhoff et al 454).
All of the above points have an impact on understanding the influence of American
security guarantees and trade. Clearly, security is a club good in the context of a collective
security agreements such as NATO or American bilateral security agreements since they are
exclusive. However, on a systemic level, these agreements have deterred major conflict, and
proponents of hegemonic stability theory could go so far as to state that this deterrence has
allowed for a peace among major powers which has led to a distinct international ordering of the
anarchic system. Therefore, all states within the system have benefited to some degree by a club
good that they are not directly drawing upon.
THE GRAVITY MODEL
While the gravity model has existed for centuries, it has only relatively recently been
applied to international trade. With his groundbreaking work Jan Tinbergen was the first to apply

Norris 17
the model to trade in 1962 with his seminal Shaping the World Economy: Suggestions for an
International Economic Policy. Since then, others have applied the model and regression tools to
illuminate the determinants of international trade. The model is widely used thanks to its
versatility, simplicity, and adaptability. However, current literature indicates that the theoretical
underpinnings for the model can be described as weak as best.
Given the versatility and adaptability of the model, it has been used to test a variety of
variable for their significance in bilateral trading patterns. The effectiveness of free trade
agreements (Oguledo and MacPhee, 1994; Martínez-Zarzoso 2003; Baier and Bergstrand 2007;
Novy 2013), club membership (Antonucci and Manxocchi 2006; Paas and Tafenau 2005),
colonization history (Lee and Park 2007; Iwanow and Kirkpatrick 2007; and Melitz 2007),
among other variables. Statistical approaches vary from paper to paper with some authors
employing fixed effects and others employing two way random effects.
While the gravity model is popularly employed in econometric research, there are some
underlying theoretical weaknesses of the model. Burger et al (2009) notes that logarithmic
transformations – which are often applied to large number variables like GDPs, populations, and
trade values – can introduce downward bias into the statistical analysis which in turn leads to
“under-predicting” trade flow trends (Burger et al 2009, 6). Burger et al (2009) also notes that
this bias is especially apparent in cases where trade flows are relatively small and that
logarithmic calculations become useless when applied to zero-value trade flows (Burger et al
2009, 6-7).
Other criticisms of the model focus on the equation’s parameters. Kepaptsoglou et al
(2010) notes that transit costs vary between locations and over time. In its generalized version,

Norris 18
the gravity model implies transit costs through the distance variable. Since the model states that
trade value varies indirectly with distance, it is understood that the distance varibale functions as
an element of trade resistance – therefore imposing a “cost” to trade value. Innovations in
transportation as well as changes to the cost of transportation may not be fully represented by the
distance variable. Given the versatility of the gravity model, these parameters could be taken into
account, but would probably lead to the logarithmic bias issues previously noted because of their
large values. Due to this issue, it has been suggested in some analysis that the gravity model be
applied to countries with similar tariff structures and transit costs (Anderson 1979).
Despite these criticisms, the gravity model is employed frequently in econometric studies
of bilateral trade flows. The addition of new variables and parameters is generally used to
mitigate the effects of the equation’s internal biases and incorporate additional information for
more accurate results. These refinements have led to an interesting characterization of the gravity
equation: while it is well known that it has weaknesses in its theoretical underpinnings and
known biases, it is still used because of its versatility and ability to produce reasonable
conclusions.
SECURITY AND TRADE
The assertion that “allies make better trading partners” is sensible at the surface.
Presumably, allies are more inclined to cooperate with one another than non-allies; more likely
to share norms; share political and strategic goals; and most importantly, are not overly threated
by another ally’s relative economic gains through trade. States that formant foreign and
economic policies rooted international liberalism certainly view the world in positive-sum terms
and do not necessarily view the economic gains of an ally as loss to themselves. Realists

Norris 19
conversely may well instinctively challenge both the assertion and the relative economic gains of
another state – allied or non-allied – given their innate zero-sum perspective.
The relative gain – and relative loss – forms the crux of the security dimension of trade.
Liberman (1996) notes that from a realist perspective, the relative economic gains from trade
may be reinvested for military purposes with the intention of maintaining the status quo or
revising the international order. Therefore, states that are concerned with this relative loss to a
competitor state may be inclined to minimize the loss by trading with allies. Mansfield and
Broson (1997) notes, “open trade is much more likely to evolve among allies than among
adversaries. Trade among allies is likely to enhance the security of all the parties; the gains from
trade accrue to states with common security goals and bolster the aggregate political-military
power of the alliance” (Mansfield and Broson 1997, 94). Presumably, the relative gain of an ally
could strengthen the overall common good – the deterrent effect – of the alliance. Thus, the
relative loss would be offset by a gain elsewhere. This rationale provides credibility to the main
assertion investigated in this paper.
Mansfield and Broson’s (1997) work utilizes a gravity model on a time series of 1960-
1990. The authors conclude that, “that allies conduct more trade than do nonallies and that the
formation of alliances tends to generate increases in trade” (Mansfield and Broson 1997, 104);
and that the correlation between alliances and trade is statistically significant. It is important to
note that the time series covers much of the Cold War. This was a period of bipolar power
distribution that lacked the current regional free trade regimes and the governance of the WTO.
Indeed, the world is far more liberalized in the post-Cold War era, and alliances may well lack
the importance they once held during the bipolar period. Only further analysis can determine if

Norris 20
this is the case. Therefore, it is important to carry out an analysis using more recent data in order
to determine if alliances still maintain their economic influence.
Others have formed similar conclusions but through different logic. Academic literature
notes that beyond creating the club goods of security and deterrence, alliances act as normative
networks that aid in the harmonization of interests and policies. This claim seems reasonable
given the economic policy harmonization between the US and EU (which is heavily composed of
NATO allies) and is evidenced by the recent Transatlantic Trade and Investment Partnership (T-
TIP). Researchers such as Gowa (2004) notes
“[A]lliances can help to achieve an efficient level of trade. Alliances raise the
salience of a small set of relatively homogenous markets, enabling firms to
coordinate their exports on these markets. The impact of these exports on national
welfare can be large enough to attract the attention of both home and destination
governments. If the latter are allies, their stake in joint- welfare maximization
endows them with an interest in deterring efforts to renegotiate the surplus that
bilateral monopolies create. Adversaries, in contrast, may seek to expropriate this
surplus” (Gowa 2004, 776).
Gowa (2004) utilizes a time series from 1907-1990 and utilizes the gravity model
approach in its analysis. Ultimately, the report concludes that there is strong evidence to
support the assertion that alliances do have a positive statistically significant effect on
trade. However much like Mansfield and Broson (1997), Gowa (2004) does not cover the
unipolar period of the post-Cold War. The time series used by Gowa (2004) actually
covers a period in which world power distribution was either multipolar or bipolar –
periods in which alliances would exert greater influence compared to their role in a
unipolar world.
The reviewed academic literature does indicate that alliances have a significant
positive effect on bilateral trade. However, the influence of alliances changes with the

Norris 21
structure of the international distribution of power. Current academic literature on the
economic dynamics of alliances is heavily focused on the Cold-War era, and thus does
not review data post 1990. Indeed, a survey of recent applications of the gravity model
shows that it is often applied to measure the effectiveness of trade agreements and
membership in regional free trade zones rather than membership in alliance networks
(Kepaptsoglou et al 2010).
MAIN BODY
A cursory glance at the descriptive statistics does seem to infer that there is some
correlation between alliances and FDI/bilateral trade for both sample groups. Data from the US
Department of Commerce, US Census Bureau, and Bureau of Economic Analysis – visualized in
Figure 1.1 indicates that 43% of all US trade in 2014 was conducted with allied states. Allied
states in this study have a formal mutual security agreement with the US. Figure 1.1 also
indicates that the remaining 57% of trade was conducted with non-allied states. The populations
of these two groups is not equal. The allied states are comprised of 31 countries, of which 27 are
members of NATO, and the remaining 167 (which includes non-recognized states such as
Taiwan and Palestine) make up the rest of US trade. A further breakdown of US trade by partner
state in 2014 (Figure 1.2) indicates that the US top trading partners are allied states save Mexico
and China.

Norris 22
Figure 1.1: US Global Trade 2014
Figure 1.2 US Global Trade by State 2014
Figures 1.3 and 1.4 (Appendix) illustrate similar results with respect to US imports and
exports locations. Again, it is clear that US allies are among the top trading destinations globally.
Non-Allied
57%
Allied
43%
PERCENT OF TOTAL TRADE VALUE WITH US 2014
Rest of the World
20%
Venezuela
1%
Ireland
1%
Malaysia
1%
Singapore
1% Hong Kong
1%Switzerland
1% Belgium
1%Italy
1%
Netherlands
2%Saudi Arabia
2%
India
2%
Taiwan
2%
Brazil
2%
France
2%
United Kingdom
3%
Korea, South
3%
Germany
4%
Japan
5%
Mexico
13%
China
15%
Canada
17%
PERCENT OF TRADE VALUE WITH US GLOBALLY 2014

Norris 23
American FDI positions follow a similar distribution between allied and non-allied states. As
illustrated in Figure 1.7, a majority (65%) of US foreign direct investment is in its 31 allied states
and the remaining 35% in non-allied states. Figure 1.8 (Appendix) further breaks down US
global FDI position by destination state. A full 50% of the total value of US FDI positions is
located in 5 countries (Netherlands, United Kingdom, Luxemburg, Canada, and Ireland) with the
first 4 being American allies. This cursory glance at US global trade and FDI positions does
indicate some correlation with alliances; and therefore, warrants further investigation.
Figure 1.7: US FDI Position 2014
FDI in Allied States
65%
FDI in Non-Allied
States
35%
US FDI POSITION 2014 ALLIED VS NON-ALLIED
DESTINATIONS (WORLD-WIDE)

Norris 24
The sample groups for the tests proposed and conducted in the report yield similar
results to those observed in the global data. Figure 1.9 illustrates that of the 12 random states (4
allied, 8 non-allied) 59% of US trade is conducted with allied states and 41% is conducted with
non-allied states. Foreign direct investment is similarly allied centric as well. Figure 1.10
illustrates that a vast majority of bilateral FDI for the random sample group states and the US is
with allied states. Again, it is clear that there is an American economic predilection for allied
services, goods, and investment opportunities.
Figure 1.9: US Trade Value and Random Sample States 2014
Figure 1.10 US-Random State Sample Bilateral FDI Value 2014
Allied
59%
Non Allied
41%
RANDOM SAMPLE TRADE VALUE DISTRIBUTION 2014
Allied
85%
Non-Allied
15%
RANDOM SAMPLE AGGREAGATE BILATTERAL FDI
VALUE 2014

Norris 25
Figure 1.13 Allied vs Non-Allied Trade Value in Asia Pacific 1990-2014
Preliminary data from the Asia-Pacific sample group offers somewhat different results.
Allied trade value over the 1990-2014 time series is relatively flat, whereas non-allied trade
(driven mainly by the growth of Chinese exports) grows by a factor of nine. Non-allied trade
value is approximately double that of allied trade value, with the former surpassing the latter in
value in 2001. It can be postulated that the combined effects of the 2001 US recession, the
growth of the Asian Tigers during the 1990s and China’s ascension to the WTO in 2001
contributed to this increase.
The difference between US FDI positions in allied and non-allied is less dramatic. Figure
1.14 illustrates that the aggregate US FDI position in allied versus non-allied states is
comparable and both seem to indicate similar rates of growth. Figure 1.15 breaks the data down
to a state level. As of 2014 the US FDI position in the Asia-Pacific states was $706.6 billion,
with $336.1 billion invested in allied states and $370.5 billion invested in non-allied states.
0
1E+11
2E+11
3E+11
4E+11
5E+11
6E+11
7E+11
8E+11
9E+11
1E+12
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Allied vs Non-Allied Trade Value in Asia-Pacific 1990-2014
(US nominal dollars)
Allied Trade Value Non-AlliedTrade Value

Norris 26
Figure 1.14 US FDI Position in Asia-Pacific States 1990-2014
Figure 1.15 US FDI Position in Asia-Pacific States 2014
0
50000
100000
150000
200000
250000
300000
350000
400000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
US FDI POSITION IN ASIA-PACIFIC 1990-2014 ($millions)
US FDI Outflows ($millions) To Allies US FDI Outflows ($millions) to Non-Allies
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%
Rest of Asia Pacific
New Zealand
Thailand
Indonesia
Malaysia
Taiwan
South Korea
China
Hong Kong
Japan
Singapore
Australia
US FDI POSITION IN ASIA PACIFIC STATES 2014

Norris 27
Inward FDI indicates a much different dynamic. Figures 1.16 and 1.17 illustrate the vast
difference between the FDI positions of allied and non-allied Asia-Pacific states. Allied states
have consistently held a greater amount of US equity securities than non-allied states over the
past 25 years. When aggregated, allied states held 91% of the total Asia-Pacific FDI position
($504.4 billion) in the United States, with Japan holding approximately $372.8 billion.
Figure 1.16 Asia-Pacific FDI Position in the United States
Figure 1.17 Allied vs Non-Allied FDI Position in the US
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Asia-Pacific FDI Positions in the United States 1990-2014
($million)
Allied US FDI Position ($millions) Non-Allied US FDI inflows ($millions)
Allied
91%
Non-Allied
9%
ALLIED VS NON-ALLIED FDI POSITIONS IN THE US 2014

Norris 28
The preliminary data for the random sample group, the Asia-Pacific sample group, as
well as the global data indicate that it is possible that there is some correlation between trade/FDI
flows and alliances. Clearly, some of the figures presented above demonstrate that there is a
stronger trade and FDI connection with allied states than non-allied states. However, the
presented descriptive statistics do not indicate whether this correlation is significant. This
determination can only be made through further investigation and statistical analysis. The next
section of this paper presents the findings of 24 panel regressions. The information garnered
from these regressions will aid in the determination of whether the hypothesized correlation is
statistically significant.
MAIN FINDINGS
The statistical analysis of the trade data through STATA generated interesting and mixed
results. The assertion that “allied states trade more and are bettering trading partners” does not
hold true under all circumstances according to the analysis for both sample populations (Asia-
Pacific states and the random sampling of states). Twenty-four regressions were carried out to
test each proposed hypotheses using the time series 1990-2014, 1990-1999, 2000-2014 at a 95%
confidence interval. A summary of each regression is produced below. The results indicate that
there is a positive correlation between alliances (operationalized through mutual security/defense
agreements with the US) and trade value. However, this correlation is only statistically
significant over the long-term (1990-2014).

Norris 29
RANDOM SAMPLE GROUP
Chart 1.1 Regression 1: Mutual Defense Agreement Significance and Trade 1990-2014
The analytical statistics in Regression 1 indicate that there is a significant positive correlation
with respect to GDP, population sizes, and the presence of a mutual defense agreement with the
US on bilateral trade for the time series 1990-2014. The results also indicate that there is a
significant negative correlation with both distance and free trade agreements. The former is
expected given that the gravity model indicates that there is an inverse relationship between trade
value and distance (states further from one another are less likely to trade with one another in
comparison to their neighboring states). Surprisingly, the results do indicate that the presence of
a free trade agreement (FTA) does have a statistically significant, but small negative effective on
bilateral trade flows between states in the random sample and the United States. One possible
explanation for this counterintuitive result is that the random sample includes very large US

Norris 30
trading partners without a FTA. It is possible that the data is skewed by their presence. Finally,
the results of Regression 1 indicate that the first null hypothesis should be rejected. In
conclusion, for the time series 1990-2014, the data indicates that for the states in the random
sample group there is a significant positive correlation between mutual security agreements and
bilateral trade value with the United States.
Regression 2 was conducted using the mutual defense agreement dummy variable for the time
series 1990-1999. The data indicates very different results from the Regression 1 (1990-2014).
For 1990-1999, FTA’s have an insignificant positive correlation with bilateral trade value with
the United States. However, the data also indicates that there is a negative correlation between
trade value and the presence of a mutual security agreement. The data also indicates that this

Norris 31
correlation is statically significant. Thus the results for the 1990-1999 are inconclusive when
testing Hypothesis 1.
Regression 3 for time series 2000-2014 notes a positive but statistically insignificant correlation
between bilateral trade value and mutual security agreements. It also indicates that there is a
small but statistically significant negative correlation between bilateral trade value and free trade
agreements for the time series. Thus, the results of Regression 3 indicate that Hypothesis 1
should be rejected.

Norris 32
Chart 2.1 Regression 4: Mutual Defense Agreement Significance and FDI 1990-2014
Regression 4 explores the relationship between mutual FDI and security agreements. There is a
large significant positive correlation between language and FDI and much like regressions one
through three, Regression 4 indicates that there is a significant negative correlation between
distance and the dependent variable. The results also indicate that mutual defense agreements do
have a negative but statistically insignificant correlation with mutual FDI positions. Thus Null
Hypothesis 2 must be considered over Hypothesis 2.

Norris 33
Regression 5 produces similar results to Regression 4. Mutual defense agreements still have a
negative but insignificant effect on mutual FDI and common language still has a relatively large
statistically significant positive correlation. Gross domestic product also has a larger coefficient
in the 1990-1999 time series than in the 1990-2014 series. One postulation for this is that
investors invested more in large developed economies than in the developing economies in the
1990-1999 period.

Norris 34
Regression 6 produces similar results to both Regressions 5 and 4. Mutual defense agreements
have an insignificant, but positive correlation with FDI among the random sample states for the
time series 2000-2014. Common language, population size, and GDP remain the only variables
with a significant correlation with FDI. Much like Regressions 4 and 5, Hypothesis 2 is rejected.

Norris 35
Chart 3.1 Regression 7: Memo of Security/Defense Significance and Trade Value 1990-2014
Regression 7 reviews the relationship between memorandums of security/defense and bilateral
trade value. The regression indicates that there is an insignificant and negative correlation
between the two variables. It also notes a slight negative and significant correlation between free
trade agreements and trade value for the time series 1990-2014 for the random sample. The
results indicate that Null Hypothesis 3 for the time series should not be rejected.

Norris 36
Regression 8 indicates that for the time series 1990-1999 that there is a positive but insignificant
correlation between memorandum of security/defense and trade value. Unlike previous
regressions, Regression 8 shows that there is a positive but insignificant correlation between free
trade agreements and trade values. Other independent variable coefficients are similar to those of
the Regressions 1-7. The data from Regression 8 encourages the rejection of Hypothesis 3 for the
time series 1990-1999.

Norris 37
Regression 9 reaches a similar conclusion to both Regression 7 and 8. There is a very slight
positive correlation between memorandums of security/defense and trade value. However this
relationship is statistically insignificant. Like the other regressions, common language and GDP
have significant and positive correlations. Finally, the 2000-2014 time series for the random
sample indicates that there is a slight significant and negative correlation between free trade
agreements and trade value.

Norris 38
ASIA-PACIFIC SAMPLE GROUP
The output data from Regression 10 is markedly different from the previous nine regressions.
Firstly, distance no longer has a negative correlation with trade value. This change is most likely
caused by the presence of states with very large GDPs and trade values with the United States.
Of all the independent variables, the only variable that has a significant positive correlation is
mutual defense. It should be noted that the R-squared value of .4940 is quite low in comparison
to the other regression. The R-squared value is a measure of closeness between the data points
and the regression line. As the value of this figure approaches 1.0000, the regression line will
better explain and “fit” the data trends. Using the Hypothesis 1 test, Null Hypothesis 1 is rejected
for the 1990-2014 time series.

Norris 39
Regression 11 for the Asia-Pacific sample on the 1990-1999 time series indicates that mutual
security agreements do have a positive correlation with trade values; however, this relationship is
statistically insignificant. Partner country GDP and US population remain the only other
variables that have a significant positive correlation. The FTA variable was automatically
omitted by STATA due to collinearity with another variable. The results of Regression 10
indicate that Hypothesis 1 should be rejected and that Null Hypothesis 1 should be accepted.

Norris 40
Regression 12 indicates the strongest significant positive correlation observed in all the
regression tests. With the exception of partner country GDP, no other variable had a significant
correlation with trade value. Therefore, on the time series 2000-2014 Null Hypothesis 1 is
rejected in favor of Hypothesis 1. Thus, it can be argued with evidence that there is a correlation
between trade value and the alliances.

Norris 41
Chart 5.1 Regression 13: Memorandum of Security Significance and Trade 1990-1999
Much like previous regressions using the memorandum of security, Regression 13 indicates that
there is no significant correlation between it and trade value. Partner country GDP is the only
variable with a significant correlation present in the regression data. The results indicate that
Hypothesis 3 should be rejected, and Null Hypothesis 3 should not be rejected for the time series
1990-1999.

Norris 42
Much like Regression 13, Regression 14 does not indicate that there is a significant correlation
between memorandums of security and trade value. Again the regression indicates that the only
significant variable is partner state GDP. Hypothesis 3 is rejected in favor for Null Hypothesis 3
for the time series 2000-2014.

Norris 43
Regression 15 does not follow the long term trends observed in the mutual security
agreements/trade value regressions. Unlike those regressions, memorandums of security/trade
value regressions do not indicate any long term correlations between the two variables. Again,
the only variable that has a significant positive correlation is partner state GDP. Therefore,
Hypothesis 3 is rejected on the time series 1990-2014 in favor of Null Hypothesis 3.

Norris 44
Regression 16 indicates that there is a positive correlation between bilateral FDI and mutual
defense agreements for the Asia-Pacific states on the 1990-1999 time series. However, this
correlation is not significant. Therefore Hypothesis 2 is rejected in favor of Null Hypothesis 2.

Norris 45
Regression 17 indicates that there are no significant positive correlations among the variables for
the bilateral FDI/mutual security test on the 2000-2014 time series. As a result, Hypothesis 2 is
rejected for the time series, and Null Hypothesis 2 is adopted.

Norris 46
The final regression for the survey, Regression 18, has the strongest correlation among
the Asia Pacific FDI/Mutual Security regressions. However, much like the previous regressions
it indicates that while there is a positive correlation between the two variables of interest, the
correlation is not significant. Indeed the only significant correlation observed is the partner state
GDP variable – the only variable which remains significant throughout all the regressions.
Therefore Hypothesis 2 is rejected for the time series 1990-2014 in favor of Null Hypothesis 2.

Norris 47
GENERAL FINDINGS
Chart 7.1 Random Sample States
The general findings for the Random Sample State regressions are replicated in Chart 7.1.
They indicate that all tests, with the exception of regressions for mutual security/trade value on
the 1990-1999 and 1990-2014 time series, lacked a significant correlation between the variable
of interest and trade value. The regression for the 1990-1999 time series (Chart 1.2, Regression
2) was the only regression to indicate that there is a significant negative correlation between
mutual security and bilateral trade value variables. However, the 1990-2014 regression for the
same variables indicates that there is a significant positive correlation between the same two
variables. In conjunction with the results of the Asia-Pacific regressions (replicated in chart 7.2)
it appears the while mutual security and bilateral trade value do not have a significant positive
Variables Time Series Positive
Corre.
Negative
Corre.
Significant Not
Significant
Memo/Trade 1990-1999 X X
Mutual/Trade 1990-1999 X X
Mutual/FDI 1990-1999 X
Mutual/FDI 1990-2014 X X

Norris 48
correlation during the shorter time series (1990-1999 or 2000-2014) there is a significant positive
correlation over the long term (1990-2014). Therefore, it can be postulated that the overall effect
of mutual security agreements on bilateral trade value are only perceptible on long time intervals.
Additional research would be required to further flesh out this dynamic and substantiate its
existence.
Chart 7.2 Asia-Pacific States
Much like the results replicated in Chart 7.1, Chart 7.2 notes that the only significant
positive correlation between the mutual security agreements and bilateral trade value occurs
during the long 1990-2014 time series. However, unlike the random sample state regressions, the
Asia-Pacific regressions indicate a significant positive correlation during the shorter 2000-2014
time series. Chart 7.2 also notes that all other regressions do indicate a positive correlation
Variables Time Series Positive Corre. Negative
Corre.
Significant Not Significant

Norris 49
between bilateral trade value and the variables of interest, but these correlations are not
statistically significant.
POLICY RECOMMMENDATIONS
The results of this study further substantiate the conclusions made by other authors and
further strengthens the claim that allies make for better trading partners. For policymakers, this
conclusion can be used to craft initiatives that take the described dynamics into consideration.
With respect to the Asia-Pacific region and the US pivot to it, policymakers must recognize the
importance of tapping into the economic benefits that emerge from alliances. The Trans-Pacific
Partnership and the US-South Korean Free Trade Agreement are both good starts to harnessing
these benefits. While popular criticism of FTAs and TPP do have their merits with respect to
corporate interests, human rights, and environmental concerns, it is important for policymakers
to consider the importance of such agreements on furthering American grand strategy and
strengthening alliances. If one of the American objectives for TPP is to manage a revisionist
China in the Asia-Pacific region, then TPP serves as a first step in strengthening American-ally
economic integration and achieving this goal. While only 4 of the 11 other signatories of TPP are
American allies, the US does have the opportunity to promote its interests, further its strategic
goals, and expand its sphere of influence. However, the United States should stop short of
expanding it alliance network. The costs of additional security and defense commitments may
out-way the gains in trade. Furthermore, with respect to the Asia-Pacific region, the creation of
additional alliances could antagonize China – jeopardizing the stability of the region.

Norris 50
DISCUSSIONS AND SHORTCOMMINGS
The presented model in this paper is not without its shortcomings. As noted in the
theoretical perspectives section, there are innate biases to the gravity model. Advanced statistical
methods may mitigate some of these biases. Additionally, there are some concerns about the
selection of United States as the main subject of this study. Given the incredible size of the
American economy and its vast alliance network, generalizing the conclusions reached by this
study to other states and their alliances is difficult. Clearly, there are large non-allied trading
partners (such as Mexico, Brazil, and China) whose bilateral trade value dwarfs countries allied
with the United States. As the largest economy on the planet, nearly every state conducts trade
with the United States. Not all states enjoy this diversity of trading partners or such an extensive
alliance network. Therefore, it is difficult to conclude whether the assertion that allies make
better trading partners is true for all states. Indeed it may well turn out the effect of alliances on
trade is more significant for other states or not significant at all. Only further investigation into
this topic can shed light on the matter.
Finally, another area of potential research is the “spill-over” effect of alliances. The
model presented in this paper does not take into consideration the effect alliances have on trade
from neighboring non-allied states. For example, Switzerland and a number of Balkan states are
not members of NATO. However, it is possible that given their proximity to NATO members,
they enjoy some aspect of NATO’s deterrence as a spill-over effect. Whether this spill-over
effect creates greater security, effects trade flows, or promotes cooperation with the United
States requires further investigation before a conclusion can be made. Given the versatility and
adaptability of the gravity equation, this variable could be incorporated.

Norris 51
CONCLUSION
This study has reviewed the effect that alliances have on bilateral trade value and
investigated whether the assertion that “allies make better trading partners” is accurate. The
reviewed academic literature offers compelling reasons as to why states should trade with their
allies. Such reasons include security guarantees, the harmonization of interests, the strengthening
of the alliance, and among other reasons. The data collected from the two sample groups – the
Asia-Pacific region and the random sample state – is analyzed using the gravity model of
international trade and panel regressions in STATA. The results from the multiple regressions
indicate that there is a positive correlation between alliances and bilateral trade value on 1990-
1999, 2000-2014, and 1990-2014 time series. Many of the regressions indicate that this
correlation is not statistically significant. The results from the regressions indicate that alliances
do not have a significant positive effect on FDI. The explanatory memorandum of
security/defense variable also does not have a significant effect on trade value either. However,
the data does show that there is a significant positive correlation over the 1990-2014 for bilateral
trade value. These results demonstrate that under certain circumstances, alliances do contribute
to an increase in trade value.

Norris 52
ACKNOWLEDGMENTS
A special thanks to those that rendered assistance in conducting this research. Many thanks to
Professor Ursula Tafe, Anthony DeJoseph, Dr. Jie Chen, and Carl Farkry for their input and
assistance.

Norris 53
BIBLIOGRAPHY
Albo, Gregory. "The old and new economics of imperialism." Socialist Register 40.40 (2009).
Anderson, James E. "A theoretical foundation for the gravity equation." The American Economic
Review 69.1 (1979): 106-116.
Baier, Scott L., and Jeffrey H. Bergstrand. "Do free trade agreements actually increase members'
international trade?." Journal of international Economics 71.1 (2007): 72-95.
Barbieri, Katherine. "Economic interdependence: A path to peace or a source of interstate
conflict?" Journal of Peace Research 33.1 (1996): 29-49.
Borys, Bryan, and David B. Jemison. "Hybrid arrangements as strategic alliances: Theoretical
issues in organizational combinations." Academy of management review 14.2 (1989):
234-249.
Burger, Martijn, Frank Van Oort, and Gert-Jan Linders. "On the specification of the gravity
model of trade: zeros, excess zeros and zero-inflated estimation." Spatial Economic
Analysis 4.2 (2009): 167-190.
Burnell, Peter. "International democracy promotion: a role for public goods theory?."
Contemporary Politics 14.1 (2008): 37-52.
Capling, Ann, and John Ravenhill. "Multilateralising regionalism: what role for the Trans-Pacific
Partnership Agreement?." The Pacific Review 24.5 (2011): 553-575.
Christensen, Thomas J. "China, the US-Japan alliance, and the security dilemma in East
Asia." International Security 23.4 (1999): 49-80.
Copeland, Dale C. "Economic interdependence and war: A theory of trade
expectations." International security 20.4 (1996): 5-41.
Das, Tushar K., and Bing-Sheng Teng. "A resource-based theory of strategic alliances." Journal
of management 26.1 (2000): 31-61.
Dudley, Leonard. "Foreign aid and the theory of alliances." The Review of Economics and
Statistics (1979): 564-571.
Galtung, Johan. "A structural theory of imperialism." Journal of peace research (1971): 81-117.
Gibler, Douglas M., and Scott Wolford. "Alliances, then democracy an examination of the
relationship between regime type and alliance formation."Journal of Conflict
Resolution 50.1 (2006): 129-153.
Gowa, Joanne, and Edward D. Mansfield. "Alliances, imperfect markets, and major-power
trade." International Organization 58.04 (2004): 775-805.

Norris 54
Gulati, Ranjay. "Social structure and alliance formation patterns: A longitudinal analysis."
Administrative science quarterly (1995): 619-652.
Kaul, Inge. "Public Goods: Taking the Concept to the 21st Century." The Market of the Public
Domain Drache D.(ed.), London and New York: Routledge (2001): 255-273.
Kaul, Inge, Isabelle Grunberg, and Marc A. Stern. "Global public goods." Global public
goods 450 (1999).
Kaul, Inge, and Ronald U. Mendoza. "Advancing the concept of public goods." Providing global
public goods: Managing globalization (2003): 78-111.
Kavanagh, Jennifer. U.S. Security-Related Agreements in Force Since 1955: Introducing a New
Database. Santa Monica, CA: RAND Corporation, 2014.
http://www.rand.org/pubs/research_reports/RR736.html. Also available in print form.
Kepaptsoglou, Konstantinos, Matthew G. Karlaftis, and Dimitrios Tsamboulas. "The gravity
model specification for modeling international trade flows and free trade agreement
effects: a 10-year review of empirical studies." The open economics journal 3 (2010): 1-
13.
Liberman, Peter. "Trading with the enemy: security and relative economic gains." International
Security 21.1 (1996): 147-175.
Long, Andrew G., and Brett Ashley Leeds. "Trading for Security: Military Alliances and
Economic Agreements*." Journal of Peace Research 43.4 (2006): 433-451.
Magdoff, Harry. The age of imperialism: The economics of US foreign policy. Vol. 21. NYU
Press, 1969.
Mansfield, Edward D., and Rachel Bronson. "Alliances, preferential trading arrangements, and
international trade." American Political Science Review91.01 (1997): 94-107.
Manyin, Mark E., et al. "Pivot to the Pacific? The Obama Administration's Rebalancing Toward
Asia." Library ff Congress Washington Dc Congressional Research Service, 2012.
Martínez-Zarzoso, Inmaculada, and Felicitas Nowak-Lehmann. "Augmented gravity model: An
empirical application to Mercosur-European Union trade flows." Journal of applied
economics 6.2 (2003): 291-316.
Moroney, Jennifer D. P., Celeste Gventer, Stephanie Pezard and Laurence Smallman. Lessons
from U.S. Allies in Security Cooperation with Third Countries: The Cases of Australia,
France, and the United Kingdom. Santa Monica, CA: RAND Corporation, 2011.
Morrissey, Oliver, Dirk Willem Te Velde, and Adrian Hewitt. "Defining international public
goods." International Public Goods. Springer US, 2002. 31-46.

Norris 55
Murdoch, James C., and Todd Sandler. "Complementarity, free riding, and the military
expenditures of NATO allies." Journal of public economics 25.1 (1984): 83-101.
Novy, Dennis. "Gravity redux: measuring international trade costs with panel data." Economic
Inquiry 51.1 (2013): 101-121.
Oguledo, Victor, and Craig R. MacPhee. "Gravity models: a reformulation and an application to
discriminatory trade arrangements." Applied Economics26.2 (1994): 107-120.
Olson, Mancur, and Richard Zeckhauser. "An economic theory of alliances." The Review of
Economics and Statistics (1966): 266-279.
Parkhe, Arvind. "Strategic alliance structuring: A game theoretic and transaction cost
examination of interfirm cooperation." Academy of management journal 36.4 (1993):
794-829.
Sandler, Todd, and John T. Tschirhart. "The economic theory of clubs: An evaluative
survey." Journal of Economic Literature 18.4 (1980): 1481-1521.
Sandler, Todd, Jon Cauley, and John F. Forbes. "In defense of a collective goods theory of
alliances." Journal of Conflict Resolution 24.3 (1980): 537-547.
Sandler, Todd. "Impurity of defense: An application to the economics of alliances." Kyklos 30.3
(1977): 443-460.
Sandler, Todd. "The Economic Theory of Alliances A Survey." Journal of conflict
resolution 37.3 (1993): 446-483.
Santos, Theotonio dos. "The structure of dependence." The American economic review 60.2
(1970): 231-236.
Schäferhoff, Marco, Sabine Campe, and Christopher Kaan. "Transnational Public‐Private
Partnerships in International Relations: Making Sense of Concepts, Research
Frameworks, and Results." International Studies Review 11.3 (2009): 451-474
.Schweller, Randall L. "New realist research on alliances: Refining, not refuting, Waltz's
balancing proposition." American Political Science Review91.04 (1997): 927-930.
Snyder, Glenn H. "Alliance theory: A neorealist first cut." Journal of International
Affairs (1990): 103-123.
Teece, David J. "Competition, cooperation, and innovation: Organizational arrangements for
regimes of rapid technological progress." Journal of Economic Behavior &
Organization 18.1 (1992): 1-25.

Norris 56
Timbergen, Jan. "Shaping the world economy." Suggestions for an international economic
policy', New York (1962).
Tollison, Robert D., and Thomas D. Willett. "An economic theory of mutually advantageous
issue linkages in international negotiations." International Organization 33.04 (1979):
425-449.
Walt, Stephen M. "Alliance formation and the balance of world power." International
security 9.4 (1985): 3-43.
Walt, Stephen M. "Alliances: balancing and bandwagoning." International Politics: Enduring
Concepts and Contemporary Issues (2000): 96-103.
Walt, Stephen M. "Testing theories of alliance formation: the case of Southwest
Asia." International Organization 42.02 (1988): 275-316.
Walt, Stephen M. "The progressive power of realism." American Political Science Review 91.04
(1997): 931-935.
Walt, Stephen M. "Why alliances endure or collapse." Survival 39.1 (1997): 156-179.
Waltz, Kenneth N. "Evaluating theories." American Political Science Review91.04 (1997): 913-
917.
Waltz, Kenneth N. "NATO expansion: A realist's view." Contemporary Security Policy 21.2
(2000): 23-38.
Waltz, Kenneth N. "The origins of war in neorealist theory." The journal of interdisciplinary
history 18.4 (1988): 615-628.
Weiss, Thomas G. "Governance, good governance and global governance: conceptual and actual
challenges." Third world quarterly 21.5 (2000): 795-814.
Young-Ybarra, Candace, and Margarethe Wiersema. "Strategic flexibility in information
technology alliances: The influence of transaction cost economics and social exchange
theory." Organization Das,

Norris 57
APPENDIX
Figure 1.3 US Exports by State 2014
Rest of the World
19%
Chile
1%Italy
1% Saudi Arabia
1%Colombia
1% India
1%
United Arab
Emirates
1%
Switzerland
1%
Australia
2%
Taiwan
2%Singapore
2%
France
2%
Belgium
2%
Hong Kong
3%Brazil
3%
Netherlands
3%
Korea, South
3%
Germany
3%
United Kingdom
3%
Japan
4%
China
8%
Mexico
15%
Canada
19%
PERCENT OF US EXPORTS GLOBALLY 2014

Norris 58
Figure 1.4 US Imports by State 2014
Figure 1.5 US Exports 2014
Rest of the World
17%
Russia
1%
Thailand
1%
Venezuela
1%
Malaysia
1% Brazil
1%
Vietnam
1%
Switzerland
1%Ireland
1%
Taiwan
2%Italy
2%India
2%
France
2%Saudi Arabia
2%
United Kingdom
2%
Korea, South
3%Germany
5%
Japan
6%
Mexico
13%
Canada
15%
China
20%
PERCENT OF US IMPORTS GLOBALLY 2014
Non-Allied
55%
Allied
45%
PERCENT OF US EXPORTS GLOBALLY 2014

Norris 59
Figure 1.6: US Imports 2014
Non-Allied
59%
Allied
41%
PERCENT OF OF US IMPORTS GLOBALLY 2014

Norris 60
Figure 1.8: US FDI Position 2014
China
1%
Hong Kong
1%Brazil
1%
France
2%
Mexico
2% Japan
2%
Germany
2%
Switzerland
3%
Singapore
4%
Australia
4%
Bermuda
6%
United Kingdom
Islands, Caribbean
6%
Ireland
6%
Canada
8%
Luxembourg
9%
United Kingdom
12%
Netherlands
15%
Rest of the World
15%
US TOTAL FDI POSITION 2014 (WORLD WIDE)

Norris 61
Figure 1.11: US FDI Position in Random Sample States 2014
Figure 1.12: Random Sample States FDI Position in US 2014
Singapore
18%
Italy
3%
Netherlands
78%
US FDI POSITION IN RANDOM SAMPLE STATES 2014
Singapore
6% Italy
6%
Netherlands
88%
RANDOM SAMPLE STATES FDI POSITION IN THE US
2014

Norris-International Relations Capstone 2016-2

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (14)

Similar to Norris-International Relations Capstone 2016-2

Similar to Norris-International Relations Capstone 2016-2 (20)

Norris-International Relations Capstone 2016-2