S9 Ep44: How superpowers shape trade

Episode Summary

Executive Summary: The episode examines how great powers shape international alignment and trade. Alberto Martín explains that hegemonic countries—like the UK, US, and now China—sign disproportionately many treaties, which the authors interpret as fostering policy alignment. This alignment is associated with greater bilateral trade, though causality remains hard to prove. The episode also notes a recent unexplained decline in treaty signing.

Main Topics: Defining hegemony and dominant powers (Priority: 5/5): The discussion defines a hegemon as a large country able to influence others economically, politically, or coercively, using a global power index to identify historical dominant states. Treaties as a measure of international alignment (Priority: 5/5): The paper builds a global treaties database to proxy alignment through the extent to which countries sign treaties with one another, covering bilateral and multilateral agreements across many categories. Why alignment can increase trade (Priority: 4/5): The speaker argues that similar institutions, regulations, and political systems lower cross-border transaction costs and make trade and investment easier. Hegemons as drivers of alignment (Priority: 5/5): The research finds hegemonic countries sign a disproportionate share of treaties even after controlling for size, suggesting they help coordinate alignment across the international system. Alignment and trade are linked, but causality is complex (Priority: 5/5): The data show that more aligned country pairs trade more, and treaties generally appear to precede trade, though the relationship may run in both directions. Recent decline in treaty signing and shifting power (Priority: 4/5): Treaty signing has fallen sharply in the last 15 years after rising for two centuries, with no clear explanation; the main treaty partner of the world shifted from the US to China in the 2010s.

Key Arguments: Hegemonic countries influence others not only through coercion but also through their sheer size and ability to set examples that others follow. Alignment is broader than trade policy; it includes similarities in democracy, regulation, and legal standards, which can facilitate trade. Treaties are used as a long-run proxy for alignment because they capture many policy domains and extend back to 1800. Countries that are hegemonic sign a disproportionate share of treaties even after controlling for population and economic size. Countries that are more aligned, as measured by treaty activity, tend to trade more with each other, including when economic treaties are excluded and tariffs are controlled for. The evidence suggests treaties usually come before trade, but the paper stops short of claiming definitive causality. The sharp decline in treaty signing over the last 15 years may signal changing global patterns, but its meaning is uncertain and could reflect shifting blocs rather than total deglobalization.

Data Points: Time span of treaty database: Since 1800 - Global Treaties Database constructed to measure alignment over two centuries. Number of treaties in database: About 77,000 - Treaties compiled from UN records, League of Nations archives, historical sources, and country-specific archives. Treaty categories: 26 categories - Treaties classified into economic and non-economic areas such as trade, investment, culture, and borders. Major historical hegemon in the 19th century: UK - Identified as the dominant global power in the 19th century. Major historical hegemon in the 20th century: US - Described as the dominant power for most of the 20th century. Other hegemonic powers mentioned: USSR, Germany, China - Examples of powers that at times met the hegemon definition. Recent decline in treaty signing: Last 15 years - Treaty signing fell significantly after a long-term upward trend. Large drops in treaty signing: 3 - World War I, World War II, and the last 15 years. Recent partner shift: US after the Berlin Wall; China in the 2010s - Largest countries the world signed treaties with shifted over recent decades. Historical correlation with UN voting: Varies by period - Treaty-based alignment correlates well with UN voting in some periods and less well in others.

Pivotal Quotes: "I gain more if I align with a country that's large than with a country that's small." — Tim Phillips: Opening framing of the episode’s central idea about power and alignment. "Hegemons are drivers of alignment. They foster alignment." — Alberto Martín: Summary of the paper’s main hypothesis and findings. "The bottom line is it's treaties that precede trade, it appears to be in the data." — Alberto Martín: Discussion of temporal ordering between treaty signing and trade flows.

Implications: The episode suggests global trade is shaped not just by tariffs but by the political alignment incentives created by dominant powers. If treaty signing continues to fall, the world may fragment into blocs or weaker cooperation, even without clear evidence of full deglobalization.