Trade Blocs and Trade Wars during the 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? 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 (in particular, the British Commonwealth) and short-run disruptions associated with the trade wars of the 1930s (in particular, large and widespread declines in bilateral trade, the narrowing of trade imbalances, and sharp drops in average traded distances). We argue that the trade wars mainly served to intensify pre-existing efforts towards 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.
Paper prepared for a workshop on “Trade Wars” held on April 6, 2019 and organized by the Japan Center for Economic Research. We thank our discussants as well as the participants at the conference. We also gratefully acknowledge research support from the Economic and Social Research Council (ESRC grant ES/P00766X/1), the Centre for Competitive Advantage in the Global Economy (CAGE, ESRC grant ES/L011719/1) at the University of Warwick, and the Japan Center for Economic Research (JCER). Jacks: Simon Fraser University and NBER, firstname.lastname@example.org. Novy: University of Warwick, CEPR, CAGE, CEP/LSE and CESifo, email@example.com. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
David S. Jacks & Dennis Novy, 2020. "Trade Blocs and Trade Wars during the Interwar Period," Asian Economic Policy Review, vol 15(1), pages 119-136. citation courtesy of