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

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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.

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TABLE OF CONTENTS

SECTION PAGE

Abstract 1

Table of Contents 2

Acronym

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

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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

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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.

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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.

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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.

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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

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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

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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:

𝑭𝒈 = 𝑮𝑴𝟏𝑴𝟐

𝒅𝟐

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.

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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 = 𝑨𝑴𝒊𝑴𝒋

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 = 𝜷𝟎 + 𝜷𝟏 𝐥𝐧(𝑴𝒊𝒕𝑴𝒋𝒕) − 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:

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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.

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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 = 𝜷𝟎 + 𝜷𝟏 𝐥𝐧(𝑴𝒊𝒕𝑴𝒋𝒕) + 𝜷𝟐𝒍𝒏𝒅𝒊𝒋𝒕 + 𝜷𝟑 𝒍𝒏(𝒑𝒐𝒑𝒊𝒕 ∗ 𝒑𝒐𝒑𝒋𝒕) + 𝜷𝟒(𝒄𝒐𝒎𝒍𝒂𝒏𝒈)

+ 𝜷𝟔(𝑭𝑻𝑨𝒕) + 𝜷𝟕(𝒔𝒆𝒄𝒖𝒓𝒊𝒕𝒚 𝒓𝒆𝒍𝒂𝒕𝒊𝒐𝒏𝒔𝒉𝒊𝒑𝒕)

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

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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.

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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.

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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).

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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

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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

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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,

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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

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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

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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-Allied57%

Allied43%

PERCENT OF TOTAL TRADE VALUE WITH US 2014

Rest of the World20%

Venezuela1%

Ireland1%

Malaysia1%

Singapore1% Hong Kong

1%Switzerland1% Belgium

1%Italy1%

Netherlands2%Saudi Arabia

2%

India2%

Taiwan2%Brazil

2%France

2%

United Kingdom3%

Korea, South3%

Germany4%

Japan5%

Mexico13%

China15%

Canada17%

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 States65%

FDI in Non-Allied States35%

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

Allied59%

Non Allied41%

RANDOM SAMPLE TRADE VALUE DISTRIBUTION 2014

Allied85%

Non-Allied15%

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

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9E+11

1E+12

19

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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

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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

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Asia-Pacific FDI Positions in the United States 1990-2014($million)

Allied US FDI Position ($millions) Non-Allied US FDI inflows ($millions)

Allied91%

Non-Allied9%

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

Memo/Trade 1990-2014

X

X

Memo/Trade 2000-2014

X

X

Mutual/Trade 1990-1999

X X

Mutual/Trade 1990-2014 X

X


X

Mutual/FDI 1990-1999

X


X

X


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

Mutual/FDI 1990-1999 X

X


X


X


X


X


X


X


X


X

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

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APPENDIX

Figure 1.3 US Exports by State 2014


Chile1%Italy

1% Saudi Arabia1%Colombia

1% India1%

United Arab Emirates

1%Switzerland

1%

Australia2%

Taiwan2%Singapore2%

France2%

Belgium2%

Hong Kong3%Brazil

3%

Netherlands3%

Korea, South3%

Germany3%

United Kingdom3%

Japan4%

China8%

Mexico15%

Canada19%

PERCENT OF US EXPORTS GLOBALLY 2014

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Figure 1.4 US Imports by State 2014

Figure 1.5 US Exports 2014


Russia1%

Thailand1%

Venezuela1%

Malaysia1% Brazil

1%Vietnam

1%Switzerland

1%Ireland1%

Taiwan2%Italy

2%India2%

France2%Saudi Arabia

2%

United Kingdom2%

Korea, South3%Germany

5%Japan

6%

Mexico13%

Canada15%

China20%

PERCENT OF US IMPORTS GLOBALLY 2014

Non-Allied55%

Allied45%

PERCENT OF US EXPORTS GLOBALLY 2014

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Figure 1.6: US Imports 2014

Non-Allied59%

Allied41%

PERCENT OF OF US IMPORTS GLOBALLY 2014

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Figure 1.8: US FDI Position 2014

China1%

Hong Kong1%Brazil

1%France

2%

Mexico2% Japan

2%Germany

2%Switzerland

3%

Singapore4%

Australia4%

Bermuda6%

United Kingdom Islands, Caribbean

6%

Ireland6%

Canada8%

Luxembourg9%

United Kingdom12%

Netherlands15%


US TOTAL FDI POSITION 2014 (WORLD WIDE)

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Figure 1.11: US FDI Position in Random Sample States 2014

Figure 1.12: Random Sample States FDI Position in US 2014

Singapore18%

Italy 3%

Netherlands78%

US FDI POSITION IN RANDOM SAMPLE STATES 2014

Singapore6% Italy

6%

Netherlands88%

RANDOM SAMPLE STATES FDI POSITION IN THE US 2014

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