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Norman Angell and the logic of economic interdependence revisited: 1914, 2014

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Abstract

There are regional fears that Beijing will use its growing clout to embark on an aggressive, expansionist policy in International Relations, hence the possibility of a collision course with the USA reminiscent of how Anglo-German tensions at the beginning of the twentieth century escalated into World War One. Closer scrutiny, however, suggests grounds for downplaying the likelihood of such a scenario. We outline this argument based on the following points: (i) there is a much higher level of economic interdependence between China and the USA today, compared to Britain and Germany, (ii) the corresponding levels of nationalism in China and the USA are lower than in Britain and Germany, (iii) the political alignments of international relations in the Asia Pacific in 2014 are less ambiguous than those in Europe in 1914, hence less potential for diplomatic miscalculation and (iv) the military and economic instruments of power that the USA and China possess, by being far more lethal than those held by Britain and Germany in 1914, would render any conflict between them an unacceptably costly catastrophe.

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Notes

  1. The Triple Entente was not an alliance, but, at best, an understanding that sought to restrain Britain’s historic rivalry with France and Russia. It should be noted that Britain had come close to blows with both its Entente Powers shortly before the outbreak of World War One. During the Fashoda Crisis of 1898, Britain had come close to war with France over rival territorial claims in Africa. During the Dogger Bank Incident of 1904, Russian warships en route to the Pacific Ocean to participate in the Russo-Japanese had opened fire on British fishing vessels which the Russians had evidently mistaken for Japanese submarines.

  2. Country i’s trade complementarity to country j (C ij) or country i’s expected trade intensity to country j (C ij) is obtained by replacing the expected value of trade (\( {\overline{x}}_{\mathrm{ij}} \)) for the actual one (X ij ) in the equation of footnote 1 as shown below.

    $$ {C}_{\mathrm{i}\mathrm{j}}=\frac{{\overline{X}}_{\mathrm{i}\mathrm{j}}}{X_{\mathrm{i}.}}/\frac{{X_{.}}_{\mathrm{j}}}{X_{..}} $$

    The above-defined C ij is country i’s trade intensity to country j we can expect if country i’s trade patterns are determined only by its structure of comparative advantage and disadvantage vis-a-vis country j in a utopian world where there is no an economic distance (i.e. geographical and psychic distances) between them (measured in terms of transportation cost and trade barriers). In other words, C ij is the expected trade intensity between countries i and j when D ij is 1.

  3. The divergence between the expected value of trade and the actual value defines the degree of special country bias as follows.

    $$ {B}_{\mathrm{ij}}={I}_{\mathrm{ij}}/{C}_{\mathrm{ij}}=\frac{X_{\mathrm{ij}}}{{\overline{X}}_{\mathrm{ij}}}=\frac{X_{\mathrm{ij}}}{{\displaystyle \sum_{\mathrm{h}}{\overline{X}}_{\mathrm{ij}}^{\mathrm{h}}}}=1/\left\{{\displaystyle \sum_{\mathrm{h}}\left(\frac{X_{\mathrm{ij}}^{\mathrm{h}}}{X_{\mathrm{ij}}}\right)}\frac{1}{B_{\mathrm{ij}}^{\mathrm{h}}}\right. $$

    where B hij is the degree of special country bias in the trade of commodity h (B hij = X ij h/ \( {\overline{X}}_{\mathrm{ij}}^{\mathrm{h}} \)) and B ij turns out to be a weighted harmonic mean of B ij h. The above-defined B ij is nothing but a bias factor which deviates I ij away from C ij when an economic distance (D ij) does exist between two countries. In other words, B ij will increase when an economic distance (i.e., geographical and psychic distances) between countries i and j decreases and mutually favourable trade agreements between the two countries such as FTA are established. The first line of the above equation gives a decomposition of trade intensity into two components as follows.

    $$ {I}_{\mathrm{ij}}={C}_{\mathrm{ij}}\times {B}_{\mathrm{ij}} $$

    which is the basic formula for our analysis.

  4. This data is based on statistics provided by the US Census Bureau, ‘Trade in Goods with China’, http://www.census.gov/foreign-trade/balance/c5700.html, accessed 20 February 2014.

  5. The long endurance provided for by nuclear-powered submarines enables them to remain submerged for longer periods of time, thereby enhancing their ability to remain undetected for longer periods of time. Whilst diesel and electrically powered submarines produce less noise compared to nuclear-powered vessels, the former also have less endurance, thereby limiting their operational range and constricting the Chinese submarine fleet to its littoral waters—hence suggesting that, for now, China has little interest in long-range power projection.

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Acknowledgment

The authors would like to thank the following scholars for their feedback, which greatly assisted in the successful publication of this manuscript: Richard Cooper, Department of Economics, Harvard University. John Lee, The Hudson Institute Balasz Szanto, Department of International and Strategic Studies, University of Malaya.

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Correspondence to Er-Win Tan.

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Tan, EW., Kim, S.J. & Kim, GS. Norman Angell and the logic of economic interdependence revisited: 1914, 2014. Asia Eur J 13, 479–500 (2015). https://doi.org/10.1007/s10308-015-0428-8

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  • DOI: https://doi.org/10.1007/s10308-015-0428-8

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