Seminar Vol. 123

Title: The Impact of Military Alliance on International Trade: Taking "Nato Enlargement" as a Quasi-Experiment

Speaker: Bing Li, Central University of Finance and Economics

Time: December 21st, 2018 15:00–16:15

Venue: Conference Room 106B, Zhonghui Building (IESR, JNU College of Economics)

About the speaker:

Bing Li is an Associate Professor at the Central University of Finance and Economics (China), and the Dean of Trade and Economics Department. He received PhD in Economics from Jilin University in 2008, and PhD in Social Science from Hong Kong University of Science and Technology in 2011. His main research interests are: international trade, foreign direct investment, political economy of international relations, network economics, and big data application.

Abstract:

Peace and stability are of great significance to the development of the economy and trade. For this reason, countries adopt different strategies of political diplomacy and military alliance is an important one. This paper uses the three eastward expansions of NATO after the Cold War as the quasi-natural experiment. Using the global bilateral trade data and subdivided data from 1995 to 2015, we adopt DID method in the gravity model to identify the effect of joining NATO to the foreign trade of the new member states. The empirical results show that it has a positive effect on their export, while both the export and import trade between old and new members have a promotion effect. Combined with subdivided data, we study different types of products and find that it can be explained by two reasons. On one hand, the reduction of defense expenditures may cause the transfer of resources to productive development more. On the other hand, strategic mutual trust between old and new member countries is increased, which helps to create a more stable and peaceful business environment. This discovery has provided new ideas for China's current "partnership" foreign policy.