Barry Eichengreen, Arnaud Mehl, and Livia Chit��u: Mars o...

Barry Eichengreen, Arnaud Mehl, and Livia Chit��u: Mars or Mercury Redux: The Geopolitics of Bilateral Trade: "The pre-World War I period... whether trade agreements are governed by pecuniary factors... or by geopolitical factors.... We find that defense pacts boost the probability of trade agreements by as much as 20 percentage points. Our estimates imply that were the U.S. to alienate its geopolitical allies, the likelihood and benefits of successful bilateral agreements would fall significantly. Trade creation from an agreement between the U.S. and E.U. countries would decline by about 0.6 percent of total U.S. exports...

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