Wednesday 26 March 2025 12:30 - 14:00

SAL 1.04, 1st Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

About this event

Statecraft involves the strategic use of various tools by national governments to achieve geopolitical objectives. Among these tools, trade policy has been wielded as both a carrot and a stick to foster political alignment and shape the behavior of rivals. This paper revisits the question of optimal tariffs in a setting where large countries value not only economic welfare but also the political alignment of smaller nations. We examine two geopolitical scenarios. In the first, a single dominant "hegemon" interacts with a continuum of small countries. The hegemon offers a preferential trade agreement to those that choose to align with it, while non-aligned countries face Most Favored Nation (MFN) tariffs in accordance with WTO rules. In the second, a bipolar world features two "great powers," each offering free trade agreements to aligned nations and imposing MFN tariffs on the unaligned. Small countries sort into three groups: those aligning with one power, those aligning with the other, and those remaining neutral. We analyze the resulting protection rates in these environments as functions of structural factors such as the strength of alignment preferences and the size of the great powers.

Participants are expected to adhere to the CEP Events Code of Conduct.

Directions

This event will take place in SAL 1.04, 1st Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.

Trade and Urban Seminars are part of the CEP's Trade programme and Urban programme.