International trade flows may be sensitive to large changes in international relations and public attitudes, according to research by Guy Michaels and Xiaojia Zhi. Their study finds that US imports from France declined sharply following the two countries' dispute over the invasion of Iraq, which led to a deterioration in Americans' opinions of France so drastic that French fries were renamed 'freedom fries'.

The research finds that the fall in trade applied not only to consumer goods (such as wine) but also to imports purchased by firms. This implies that managers don't simply care about their bottom line, but also have some latent patriotism.

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February 2008     Paper Number CEPCP242

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