Political Alignment, Protests, and Trade

Abstract

Do political relations between countries have an effect on trade during times of internal unrest? Theories claim that states with similar policy positions on global issues are more likely to trade, along with states whose people have a similar culture, but less is known about whether short-term shifts can occur as a result of popular movements within a country. Examining two different levels of intensity of popular unrest within countries, I show that it is plausible that policy stances do impact trade during times of instability. I first examine two medium-sized economies that underwent a peaceful regime change which changed their relations with former allies. This analysis shows that while Poland’s data does indicate rapid trade shifts aligned with their new political stance, the results from Iran weakly suggest the opposite. I then examine countries that experienced unrest during the 1968 wave of protests, using the binary nature of Cold War international politics as a framework in which to examine the impacts of alliances on trade variations during unrest. I argue that economic actors are responsive to domestic opinion in trade partners, and when the people of one country demand a change in their government’s stance, allies reduce trade with that country while opponents increase trade.