The strategic trade calculus of states: Cooperation and conflict in emerging industries

Commercial rivalries among the advanced industrial states increasingly center on market share in emerging industries. Because these industries are characterized by a host of imperfections, the state can potentially help domestic firms win market share by subsidizing exports or research and development. More compelling still is the insight that in certain of these oligopolistic settings, state intervention can be welfare-enhancing. Critics insist, however, that this incentive for strategic trade policy is overshadowed by the risk of foreign retaliation. The research puzzle that informs the dissertation is thus as follows: Why would a state risk a trade war by intervening in an emerging industry, given this threat of foreign retaliation? And why would a state practicing strategic trade cooperate in some of these industries but not others, given that the threat of foreign retaliation did not deter its initial intervention? The dissertation argues that states are likely to intervene and (or) retaliate in an emerging industry, if the externalities that result can be consumed and internalized, in relation to the capabilities of a trade rival. In theorizing about these commercial rivalries, the dissertation speaks more broadly to debates in international politics, elaborating six different cooperation problems which characterize relations among states.