Abstract
What precisely were the causes and consequences of the trade wars in the 1930s? Were there perhaps deeper forces at work in reorienting global trade prior to the outbreak of World War II? And what lessons may this particular historical episode provide for the present day? To answer these questions, we distinguish between long‐run secular trends in the period from 1920 to 1939 related to the formation of trade blocs and short‐run disruptions associated with the trade wars of the 1930s. We argue that the trade wars mainly served to intensify pre‐existing efforts toward the formation of trade blocs which dated from at least 1920. More speculatively, we argue that the trade wars of the present day may serve a similar purpose as those in the 1930s, that is, the intensification of China‐ and US‐centric trade blocs.
Highlights
With the recent souring of relations between China and the United States, the notion of trade wars is no longer consigned to academic treatments of the disastrous interwar period
What precisely were the causes and consequences of the trade wars in the 1930s? Were there perhaps deeper forces at work in reorienting global trade prior to the outbreak of World War II? And what lessons may this particular historical episode provide for the present day? This paper takes its purpose in providing some answers to these questions, and in emphasizing the limits of historical parallels across two time periods with some common features but emerging from very different environments
We explore a few interesting contours of the data, as they relate to the second great trade collapse starting from 1929 and the trade wars of the 1930s
Summary
With the recent souring of relations between China and the United States, the notion of trade wars is no longer consigned to academic treatments of the disastrous interwar period. In the context of the interwar period, there exists a healthy literature on using variants of equation (1) to explore the role of newly formed trade and currency blocs in reorienting world trade, after the Great Depression and the subsequent collapse of both the resurrected gold standard and the vestigial multilateral trading system of the pre-war period. Gowa and Hicks (2013) use a more extensive data set confirming Eichengreen and Irwin’s original results They argue that the intent of the blocs was not in terms of enhanced trade flows in general, but in tying satellite countries more closely to Britain and Germany in anticipation of another great war. Trade flows within the sterling area represent 12.9% (8.8% based on our narrow definition) and 43% with outside members
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