No Business Like FIRC Business: Foreign-Imposed Regime Change and Bilateral Trade

• Published in: British journal of political science Vol. 47; no. 4; pp. 749 - 782
• Main Authors: Zachary, Paul, Deloughery, Kathleen, Downes, Alexander B.
• Format: Journal Article
• Language: English
• Published: Cambridge, UK Cambridge University Press 01.10.2017
• Subjects: Allende Gossens, Salvador (1908-1973); Archival research; Armed forces; Business; Case studies; Change agents; Cold War; Datasets; Exports; Foreign companies; Gravity; Intellectuals; International organizations; International relations; International trade; Intervention; Military intervention; National security; Political leadership; Political risk; Political science; Guatemala; Chile; United States > US; Latin America
• ISSN: 0007-1234; 1469-2112
• DOI: 10.1017/S0007123415000332

Scholars argue that states undertake foreign military interventions for economic reasons, yet few have investigated whether intervention produces economic benefits. This article answers this question in the context of US foreign-imposed regime changes (FIRCs) in Latin America. Because FIRCs install leaders who are sympathetic to the intervener’s interests, economic arguments maintain that these interventions should increase bilateral trade between the targets and imposing countries. Yet security-based arguments assert that FIRCs should have little economic effect, as regime changes target threats rather than generate economic benefits. A third perspective argues that FIRCs reduce trade by generating political instability, which causes foreign firms to cut back on their involvement and domestic firms to experience difficulty getting goods to market. To test these competing arguments, this study employs a novel dataset on bilateral trade (1873–2007) compiled through archival research in Washington, DC. Using a gravity model and synthetic controls, it finds that FIRC produces an average decrease of 45 per cent in the dollar value of bilateral trade. Further analysis of archival sector-level data and case studies cast doubt on alternate explanations.