1
RESPONSES TO INTERDEPENDENCE.
INTERNATIONAL RESTRUCTURING,
NATIONAL VULNERA-
BILITY AND THE NEW PROTECTIONISM. *
By
Helge Hveem
Institute of Political Science
University of Oslo
,.
The problem.
"Interdependence" is as loose a concept as the international
system is complex. One important reason is that the concept
has been extensively used for purely political,
rhetorical
purposes. This has meant that practically all inter-state transactions irrespective of their form,
structural characteristics
and consequenoes for participants according to this popularised
use,
fall under the concept. But even the way the concept has
been used in theoretical works has contributed to the degradation
of it as an analytical tool.
In their seminal work - now fast becoming a neo-classical text
in its genre - Keohane and Nye recognised the loose character of
the concept. It referred according to them,
to "situations
characterised by reciprocal effects among countries or among
actors in different countries".
(Keohane and Nye,
1977 p. 8)
If one interprets this definition stricto sensu,
it may be
possible to use the concept for scholarly analytical purposes.
Such a definition would reserve the term interdependence
INT)
(hereafter
for those bilateral relationships that offer the two
partners concerned equivalent opportunities to affect each
other.
I believe that the qualification referred to - which the authors
did make although not as a main point - has largely been forgotten
in the general debate over interdependence.
The result is that the concept has become at the same time
2
too normative, too inclusive and hence too imprecise to be of
much use for scientific purposes. It needs to be redefined in
order to be reactivated for research purposes.
I propose that this may be done by on the one hand employing
the concept in a more dynamic, more contextual way, and on the
other hand by narrowing its scope of application in the direction
of the qualification that was made above. I hope to explain in what follows why this apparently contradictory double
operation is feasible. It also appears necessary to put more emphasis on the consequences of vulnerability for the parties
involved. All this invites a typology of the situations
in which INT is relevant and a classification of actors
according to how and why they are affected.
This is admittedly no easy task. Several authors have done
very important contributions to it. My own contribution will be
limited to pointing to three ways by which the concept can be
used more fruitfully:
first,
by putting more emphasis on the conflict aspect of the
dimension which the INT concept represents;
secondly, by emphasising how the workings of an interdependence relationship may change according to changes in the
context and in the actors involved; and
thirdly,
by emphasising that power plays and bargaining are
crucial processes to understand when an interdependence relationship is being analysed.
My first task will be to look at the vulnerability dimension of
the INT concept. Then I shall have a brief look at the concept of
"complex interdependence" which I find most unsatisfactory the
way Keohane and Nye have employed it. These two points will
relate indirectly to the first and the second of the arguments
just raised.
I shall end up by commenting on the third point,
suggesting
some working hypotheses for further research. The approach may
look like an "old-fashioned positivistic" one. If so that was not
intended. The thoughts put forth are preliminary and will be
further developed at a later stage.
3
On vulnerability.
For Keohane and Nye,
the concept "vulnerability interdepend-
ence" is distinguished from that of "sensitivity interdependence" .
Vulnerability is defined as those costs which an actor
must carry as a consequence of contextual change and the actions
of other actors, after he has changed his own policies in an
attempt to reduce costs. Sensitivity, on the other hand, is a
situation where an actor faces costs as a consequence of the
actions of other actors with no change in his own policies.
(ibid., p. 13)
An essential element in the vulnerability dimension is thus
alternative costs. Dependence is not a function of the costs
that result from attempts to maintain an external relationship
but the costs that would result from a collapse of the
per
relationship or a fundamental change in it. The point is emphasised
in various ways by Hirschman
Baldwin
(1945), Waltz
(1970) and
(1980).
This observation does not, however, make the vulnerability dimension directly applicable when studying the policy or strategy
choice of concrete actors, or evaluating their action flexibility. The dimension needs to be defined more precisely still. In
the treatments of many US scholars,
interpretations,
there are differences in
levels of abstraction and applications on
several important points. Whereas some look upon "sensitivity" as
part of the vulnerability dimension (Duvall,
1978 p.
63) ,
others
point out that sensitivity and vulnerability do not necessarily
change in the same direction nor to the same degree.
(Baldwin,
1980 p. 491)
Questions are also asked about the very relevance of the
sensitivity dimension, particularly as to whether or not it has
any independent explanatory power when explaining different degrees of dependence.
(Baldwin,
1979 p. 178 ff)
Finally, the
relevance of alternative costs when explaining dependence is also
questioned by some authors.
_ Several of those studies that have attempted to operationalise
the vulnerability dimension for measurement purposes also have
run into problems. In some works by economists, vulnerability may
4
appear as synonymous with the degree of openness of an economy.
(Norman,
1983) This impression is, however, either slightly
erroneous as these works may not have been aimed directly at
operationalising the dimension. Or, the impression is correct to
the extent that the focus of these works is not the strategic or
dynamic aspect of vulnerability - the action flexibility of the
actor concerned - but rather the static view of vulnerability
that disregards alternative costs
(and look upon costs in
strictly economic terms) .
Those empirical works that have attempted to operationalise
the INT concept in other ways appear to have departed from the
sensitivity dimension.
Rosecrance,
(Dolan et al s. ,
1980; Gosiorowski, 1986;
1980). Few if any have proposed
1977; and Tetreault,
to make use of alternative costs as an indicator of dependence.
Those analyses that choose the need of an actor for a specific
item as a point of departure, are few and appear to be working
on a high level of abstraction,
difficult.
thus making operationalisation
(Duvall, 1980 p. 67)
In order to assess the alternative costs of a particular
relationship for a particular actor,
known:
1)
question,
three aspects ought to be
the ability of the actor to do without the item in
2) the ability of the actor to obtain and to make
effective use of substitute items to compensate for the loss
of the original item, and 3) the ability of the actor to
obtain alternative channels for the item. Economic research
offers multiplicator coefficients and input-output matrices
to cope with the first aspect, and there is an abundant supply
of studies on substitution. I offered a survey of some of the
literature and some first empirical assessment of substitutability options in a study on one particular sector - strategic minerals.
(Hveem, 1979; and Hveem and Malnes, 1980)
as input-output tables are concerned,
As far
their application to
particular cases appears to be contingent on such a number of
assumptions that their relevance and applicability are certainly
limited both in scope and domain.
In summary, I believe that there are serious weaknesses in
those research efforts that attempt to determine the extent of
vulnerability objectively. This appears to underline the relevance
5
of a question that others have raised: is INT a subjective matter
only; or can it be defined objectively ? Or,
to put the question
differently: is INT felt in direct proportion to the degree to
which interdependence is factual, i.e. can be determined
intersubjectively ?
The classical geopolitics literature offers a lot of support
for the need to distinguish between the two aspects. Geopoliticians sometimes appear to have exaggerated out of all proportions
the vulnerability of "their" country.
In retrospect,
one may even say that some of the most dramatic
accounts of the 1973 OPEC oil price actions were also highly
exaggerated,
,
especially as they transferred what was seen as an
OPEC threat to other minerals.
In my view,
these observations underline the importance of
the subjective dimension. In other words: the essence of the
concept of vulnerability is assessed by getting to know the
perceptions that concrete actors hold on vulnerability - their
own and that of others to which they are related. Analysis of
vulnerability would therefore have to include analysis of idiosyncratic variables. It also appears reasonable to depart from
the assumption of bounded rationality.
The vulnerability dimension is, in my view, not primrily an
element of
theory of interdependence. For one thing, there is
no such theory in the strict sense of the word. Moreover, the
vulnerability dimension is a perspective that should, in order
to become part of a theory
(that proposes causality relation-
ships, be integrated into several different theories. They would
range from bargaining theory via integration theories,
theories
on internationalisation to theories of economic nationalism and
national development strategies.
One implication of this view is that there is a need to employ
the vulnerability dimension in a contextual way. By that I mean
that international structures and change represent a range
of important independent or intervening variables. In widening
lOne example is the much-cited Bergsten article in Foreign
Policy, 1973 and a follow-up in the same journal entitled "The
Threat is Real".
6
the focus one ought to be able to relate power structures and
their implications better than some existing studies have
done. They acknowledge the existence of such structures by
including the symmetry vs asymmetry variable.
But they do not
make it the central issue or the crucial variable it should
be. That reduces the chances to construct a working typology of
vulnerability situations, discuss strategic options for coping
with these situations and to explain why certain strategies are
chosen over others in concrete cases.
Another implication is that the unitary actor model must be
relaxed as an assumption. It is a serious mistake to move, as I
believe a great number of researchers now do,
in the opposite
direction; viz. the increasing number of game theoretical treatises of international relations in particular in US circles.
Interdependence's effects are always felt by some particular
group or class within countries. If some such group perceives a
negative effect,
then it will naturally demand protection from
it. The normal process of interdependence "activation" therefore
is that demand for political handling of its perceived consequences is raised from within a country. Processes of domestic interdependence activation therefore ought to figure prominently in
scholarly analysis. They have not done so far.
This probably becomes even more of a problem as we turn to the
concept
"complex interdependence".
On "complex interdependence"
The notion of complex interdependence
(COMINT) was set up in the
Keohane-Nye text as a contrast to what they perceived as realist
world modelling. COMINT has three characteristics: 1) military
power is not dominant in relationships of the complex interdependence type;
states,
2)
there are multiple channels of contact between
organised in a multiplicity of institutions not always
closesly co-ordinated one with the others; and 3) policy goals
may be subject to trade-offs,
they are not arranged in stable
orders.
If we leave out some very obvious theoretical and conceptual
7
weaknesses 2
one is left with a concept that basically rests on
two inter-state processes - that international agendas may be
manipulated
(subject to bargaining)
and that international
organisation may modify or regulate the effects of interdependence,
including the negotiating agendas.
This, I think, boils down to a question of inserting the INT
and the COMINT concepts into a theory of bargaining at the international level.
In other words and judging from the literature I
do not see any prospect that a theory of international interdependence is about to emerge. The best efforts to develop the
concept as a theory have so far been those based on Schelling
(1963) and been explicitly dealing with bargaining theory.
(Oye,
1979; Stein, 1980; Sebenius, 1984; and Baldwin, 1979 and 1980)
One interesting branch of contributions has dealt with linkage
processes. I shall confine my comments here to one simple point:
agenda manipulation or more specifically,
under which conditions
actors are likely to choose linkaging as a strategy. This boils
down to a questioning of another assumption - or maybe it is a
hypothesis - in Keohane-Nye that they did not follow up: weak
states are more likely than stronger ones to choose linkaging.
The more general hypothesis would be that linkaging is more
likely under conditions of asymmetrical complex interdependence
than under symmetrical ones.
The opposite could very well be true. Consider the case of a
small country.
another,
If it felt vulnerability in its relationship with
stronger country in one particular sector,
well prefer to insulate that sector,
it may very
not link the INT process to
other sectors. This would in particular be true if it is generally
weak externally,
i.e. has no bargaining power in other sectors
with which to influence the international relationship. But even
if it had such power,
it may choose not to activate it for fear
that the stronger state will exert a disproportionate concession.
2
Reference is made inter alia to the fact that the authors
treat the concept in a tautological way by assuming that COMINT
is characterised by the goals of actors and the type of state
policy which they adopt, two criteria that are in fact the
defining variables for the concept itself or the very reason why
they are selected out in contrast or opposition to the realist mode.
8
Many interdependence authors treat a weak-strong relationship out
of context,
forgetting about the generalised bargaining power of
the strong state that it may activate to counter any sectorial
bargaining power that the weak may enjoy.
Besides,
if a small state happens to be comparatively strong
in one particular sector,
it normally follows that there are
strong interest groups attached to that sector.
It is not hard to
imagine that such interest groups may very well object to the
sector - and hence their interests - being linked to international bargaining that will result in concessions. And if the state
had to carry the costs of making the concessions in order to
compensate the interest groups for their losses,
then the net
result may well be negative from the point of view of the state
compared to what it would have been if no linkaging had been
done.
My counter-hypothesis would be that it is especially those
stronger states which turn out to be feeling,
or perceiving,
vulnerability in one particular sector (because of a permanent or
ad hoc weakening of its position in that sector) which is also
most likely to initiate sector linkaging in international
bargaining.
(An example would appear to be the United States'
attempts to activate its military guarantee to allies faced with
a deterioriating cornpetititiveness in manufacturing industries
relative to that of Japan and the FRG.)
The other issue I wanted to touch concerns whether or not
Keohane and Nye are right in hypothesising - or assuming - that
COMINT is by definition less likely to produce conflict than is a
military type relationship. And that simple interdependence in
general creates more conflict than complex interdependence.
Intiutively the latter appears correct. But the question is
whether what appears to be normally true in micro-economic and in
micro-social contexts
(market exchanges in the local community or
cross-cutting loyalties)
is equally true in the international
one ?
The answer on this occasion is made brief: it is highly
questionable, but the criterion for deciding whether it is
questionable or not rests on a definitional issue. What may
appear as a reductionist argument is nevertheless a serious
9
possibility that few if any INT comments have adressed:
The true problem with the non-realist interedependence
literature is that it has manipulated the definition of state
security to be confined to military security. Economic security
is - and has always been - an important aspect of the total
concern of foreign policy. It is the context and the dynamics of
international systemic change that determine the relative weight
of the two (and possible other) aspects of security.
But they are both integral,
inseparable parts of state policy.
That some analysts in the past saw it differently should not keep
us from making this very simple but basic assumption. A quick
look at some accounts by practitioners in the field ought to
convince us of the tenacity of this assumption. 3
State representatives may have clothed their arguments in
military security terms in the past,
such as did the Nordic Trade
ministers when they argued for a special protection clause to be
included in the Multi-Fiber Arrangement arguing that a viable
national textile industry was a prerequisite for military
preparedness. But that argument may have been simply a concession
to the international mode or what they at the time perceived of
as an issue-hierarchy in the eyes of Secretary Kissinger and his
likes.
With trade wars on the rise and a stock market crash fresh in
our memories,
it does not seem to be necessary any longer to
plead that economic security be considered a priority goal for
state representatives as well as for a number of economic
interest groups. A continued defence for the case of COMINT as
opposed to realist military security thinking in the present
situation look more and more like a heroic fight with windmills.
If this perspective on the contemporary international political
scene is accepted,
then one may also take a fresh look at some of
the notions created by the interdependence literature up until
the present. Economic vulnerability may still not be perceived as
a such a major concern that creates as dangerous threats to
3
I am referring to among others former West German
Chancellor Helmut Schmidt, 1979 and to former Secretary of State
for Trade, Edmund Dell, 1987.
10
national security as does the threat of military holocausts. But
a proliferation of protectionism, bilateralism and less "hostile"
policies of industrial adjustment should be seen as attempts to
reduce or even reject interdependence and instead opt for
independence. It is in the nature of things that such a process
creates conflict and increasing problems of co-operation.
Contextual and relational approaches.
Our discussion so far has attempted to substantiate the view
that the vulnerability dimension is a matter of alternative
choice options, has a subjective as well as an objective
aspect to it,
should be related to several different theoretic-
al contributions,
should reflect the symmetry vs asymmetry
of power relations, and should be broadened.
In theory, an actor may solve his vulnerability problem by mobilising alternatives within himself
without,
(do
substitute or reduce his dependence on an i tern) . The
self-sufficiency strategy is perhaps more often possible than
normative interdependence-promoting models would have it,
but
may be, and is often, exaggerated as well. Proponents of it
often underestimate the trade-offs that can be gained by
playing on a vulnerability situation
(provided one is good at
playing, of course) . In the following I shall therefore
concentrate on the relational option for handling vulnerability and not consider the domestic potential as an option.
What will be done is to offer some theoretical illustrations of
how domestic processes may work to influence the international
interdependence relationship.
a. The theoretical case.
It may be a rational choice for actors not only to produce
or reproduce vulnerability in other actors, but to do that for
yourself as well. The purposeful creation of others' vulnerability to yourself is a strategy known from many historical
and contemporary cases. Literature has perhaps highlighted the
extreme cases: Nazi Germany's policy before and during World War
11
II
(Hirschman, 1945) and the policy of the apartheid Republic of
South Africa vis a vis her neighbouring majority-ruled states
during the present time
(Hanlon,
1986). There are certainly other
and less extreme examples of seeking power over others by making
them dependent on you and thus vulnerable to changes in your own
behaviour. Big powers' continued dependence on mineral supplies
and military bases in a number of Third World countries at a
time when they dispose of the means to reduce such dependencies
may be a case in point.
Lesotho and Swaziland offer the perfect example of absolute
vulnerability. They have no alternative but to carry the costs
of whatever policy the RSA imposes on them. The Republic for her part retains absolute control over the two landlocked mini-states. She is only theoretically vulnerable to
actions that may be considered by (some member of)
these states
as long as she is in a dominant position when it comes to
controlling the military-security situation in the region.
(Hveem, 1986)
The next logical category to consider is relative vulnerability. This category represents a situation whereby an actor is
capable of manoeuvering his vulnerability, but up to a point
only.
(It should not be confused with comparative vulnerability
which is how one actor's vulnerability compares with another's.)
Mexico in her relationship with the United States would be a case
in point. I shall return to that case in a moment.
The general point is the following
When we consider the
implications of vulnerability, we are considering a relational
problem.
If two actors confronting each other are both vulnerable
to one another, then there is reciprocal vulnerability.
If the respective vulnerabilities are (close to) balanced,
then there is a symmetrical relationship of vulnerability. This
is interdependence strictly speaking. The balance of terror
between the superpowers based on the destructive capacity of
nuclear weapons is a much observed case of symmetrical vulnerability.
Is cooperation the logical or rational choice of an actor
that finds himself in a situation of reciprocal vulnerability ?
Not only the superpower relationship, but a number of other cases
12
show that it is not. Ideological differences apart, a rational
choice may be to initiate conflict, or to choose a mixture of
the two. An actor may, in other words, follow a cooperation and
conflict strategy at one and the same time. The situation as is
and structural elements of the relationship will determine
which aspect of the strategy is chosen in a specific case.
External pressures or internal processes, or a mixture of the
two (a correlation or a causal link) , are such structural
elements.
Probably more often than not they work with different
intensities, or for other reasons do not coincide in two actors
that are related. This is one reason why cooperation may be
difficult although it may also represent an incentive to
cooperate. The Prisoner's Dilemma is one model for analysing
choice in such situations; I believe it has some limited
applicability
Another and probably more fruitful model can be
constructed by linking the concepts control and interest.
One practical implication of complex interdependence is that
an actor's vulnerability in one area may be offset by invulnerability (absolute or comparative) in another. Or, if two actors
are vulnerable to one another in two different areas, a linkage
strategy or a trade off between the two may be a rational choice.
Again,
the case of Mexico or the handling of the debt crisis
since 1982 may be good examples.
b. The first illustration: debt.
Absolute vulnerability is the other side of absolute control.
In this type of relationship, power is extremely asymmetrically
distributed. "Pure imperialism" as is found in many areas, instances and periods of North-South relations is a case in point.
The debt crisis of the 1980s is an illustration of a different relationship. Since the IMF, the big creditor banks and the
US government rushed to refinance the Mexican debt in 1982,
a simple model of the new North-South relationship could be
described as follows:
The creditor front controls the access of debitor countries
to new credits and the renegotiation of old loans; although some
would claim that the interest rate is determined by the market,
13
the creditors
(or US authorities) also exercise discretionary
control over that factor as well. The debitors on their side
control the repayment of old loans and the payment of interest.
As the Mexican Rescue proved,
the creditors felt vulnerable to
the threat of a financial collapse resulting from failure by
Mexican authorities to comply with their repayment obligations.
And as we realize when looking at the background for the huge
loan transfers of the 1970s,
the moving force behind it was not
purely financial motives: banks had cash, wanted borrowers. Even
motives of industrial policy and general foreign policy played a
role:
newly industrialising countries pursued aggressive export
industrialisation policies and needed to import inputs which the
industrialised countries of the OECD were only too happy to
supply them. By doing that,
they would reduce the pressure
mounting on their own industries due to the overcapacity that had
been built up and the stagflation that they were living through.
Also,
the huge loan transfers were one way of softening the
perceived danger of a Third World front demanding international
economic reform and redistribution. Loan financing was also a way
around the new economic nationalism that threatened to cut into
the interests of TNCs by nationalising their affiliates in the
Third World.
Then suddenly came dramatic increases in world that is US
interest rates and a reversal of world price trends into a
deflationary trend. Both changed the rationality of financing
economic development by loan finance and a consequent accumulation of foreign debt. After holding the debt operation for
several years, creditors started (1987) to write off "bad debt" .
As one approaches the 1990s, the situation appears to be one
of long-term complex interdependence. Industrial firms in the
North were the first beneficiaries of the debt financing of the
1970s; commercial banks took the burden of carrying the debt.
The debtors can only manage their commitments if they are able
to earn, and preferably to increase, export incomes. Such a goal
may partly coincide with the interests of manufacturers in the
North
(high technology
such interests
And banks,
firms) , partly collide with
(competing processing and cost sensitive
firms) .
the multilateral credit institutions and the govern-
14
ments (Finance Ministries) all have their stake, partly coinciding or overlapping, partly at odds with the interests of the
manufacturing sector.
In the debtor countries, different and partly contradictory
interests are also at work. There are natural temptations to evade the debt sector and refuse to repay or set limits (cf.
Peruvian case) . Such
the
tempations are tempered by the pressures of
foreign policy, by long-term interests in the relationship and
fear that they may be negatively affected by a rupture of repayment, and by domestic interest groups profitting from the
conditionality imposed by the debt position.
The implications for theory are quite obvious. First,
the
working of the relationship is contingent upon the evolution and
the relative power of domestic interest groups,
just as it
depends on the development of the bilateral relationship itself
and contextual, systemic developments. Secondly, power can be
exercised, or the power of others modified, even though an actor
is weak on power resources. What may be referred to as the power
of the weak is an underestimated option. Thirdly, we may speculate on another "unexpected consequence":
the lack of power of
the not-so-indebted. Do the heavily indebted have more leverage
on the creditors than do the latter ? Are the latter in fact
relatively worse off after the debt crisis than before
because the threat to the stability of the system and the fear
of bankruptcy in debtor countries and in heavily exposed banks
require that priority is given to the heavily indebted ? Do
greater caution in creditor circles further add to the problems
of access to loan finance for the not-so-indebted ?
c.
The second illustration: bilateralism in trade.
During the last decade, bilateralism has come to the forefront
in international trade. There has been a proliferation of Voluntary Export Restraint Aareements and Orderly Marketing Arrangements (VERAs and OMAs) . More important, however, has been a
surge of countertrade arrangements that go a long way beyond
simple barter, and that involve a good number of countries.
Estimates of the magnitude of the countertrade phenomenon vary
15
greatly. The variation, however, appears in large part to be due
to differences in definition. If a fairly broad definition of the
phenomenon is chosen,
expert estimates hold that some 25-30
percent of international trade
(mid-1980s)is covered by some form
of countertrade arrangement, whether offset, buy-back, counterpurchase, compensation or other. The backbone of this new wave
of an old trade form is no longer East-West relations, but SouthNorth and some North-North as well as many South-South relationships. More than 100 countries and 300 transnational corporations
are believed to be involved in the trade.
(Walsh,
1985)
What may explain this surge - a huge leap away from the market
mechanism into some form of organized trade
(or "managed free
trade" as the most stubborn free-traders prefer to call it)
7
In another context I have suggested and discussed several
possible hypotheses.
(1987) . One is the decline of hegemony
thesis, or to put the hypothesis more generally: the decline of
multilateral trade regimes. GATT is about dead; up come bilateral agreements in its place. Bilateralism in this version would
then be a substitute for the order created by multilateral trade
regimes. Without discussing the issue here,
(1984)
I agree with Strange
that hegemonial power has not really declined, at least
not to the extent claimed by hegemonial stability theories. Multilateralism has, however, been much weakened since the breakdown of the system of stable currency exchange rates.
A second hypothesis is found in the serious imbalances in the
balance of trade and payments position of a great number of
countries. This is partly related to the debt crisis: lack of
foreign currency has forced many countries in the South to seek
financing of imports by paying not in cash, but in goods. But
even several industrialised countries have engaged in bilateralism for about the same reason. This holds not only for the number
of offsets in military-related deals,
States and others,
but even for the United
like France, which have experienced serious
deterioriation of their foreign accounts balances. The EC and
the United States have been the most active parties seeking VERAs
and OMAs in their relations with Japan and the South East Asian
NICs.
This may be referred to not simply as old-fashioned protecti-
16
onism but bilateral protectionism. The effect of the deal is,
intended or not, quite often to exclude third parties from a
market.
Bargaining strength becomes a greater asset than quali-
ty or other comparative advantages. Vulnerability of one country
in its relationship with some other, more efficient country is
controlled by a bilateral arrangement that transfers the
vulnerability to third parties. This is not always the case;
there are cases where a VERA has opened up a market for third
parties while blocking the party whose trade is regulated by the
arrangement.
There is one final hypothesis, however, that seems to be of
increasing validity:
the industrial restructuring hypothesis.
This is particularly related to the wave of countertrade and
has both an offensive and a defensive motive attached to it.
The offensive motive is that of the NICs.
Their export industri-
alisation strategy has required that in order to be able to
finance huge industrial projects and secure their functioning for
some time in the future,
industrial co-production projects have
been set up. These projects imply that the TNC delivering the
technology supplies a range of assistance and, as partial or
full payment,
take back some part of the resulting production.
Estimates are that this type of countertrade,
industrial counter-
trade, has grown in importance relative to the more traditional,
commercial countertrade. Over the recent years, starting 1986, a
third form, financial countertrade, has been initiated. It means
that debt positions are swapped with goods
with capital as equity or other investment
(debt-for-goods)
or
(debt-far-equity) .
The defensive motive is found first of all in the practice of
poor and weak countries in the South and the Southern European
belt in particular to compensate for lack of currency and competitive ability by asking for countertrade arrangements to
maintain their market shares. They would normally ask for commercial deals, in other words: they operate in a declining sector
of the world economy.
But the defensive motive is also detectible in the actions of
the United States towards Japan. With a growing deficit in the
trade balance, protectionism has grown correspondingly and
resulted in demands for reciprocity in transactions of goods and
17
services between the two economies. Some political factions in
the United States have even demanded sector-by-sector balancing
of exchanges. Such a measure would amount to fargoing regulation
of trade that would be a complete negation of the free trade
ideology. Also, there have been attempts to play on mutual
vulnerabilities, in e.g. a US embargo of soybean exports to
Japan. Japanese vulnerability in essential goods
(and security)
were to be used as a bargaining chip to obtain reduced US
vulnerability when it comes to maintaining foreign markets for US
manufacturing
industry.
All these forms are in some way or other,
and to some degree,
attempts to control against increased vulnerability at the
national and/or corporate level. One may thus say that the
general motive is to attempt to control the effects of international restructuring,
either by simple unilateral protectionism
or, a more preferred option as it seems, by bilateralism.
Some implications for theorv.
I shall leave the concrete case and end by a few remarks on
possible implications for theory. These remarks and the concrete
suggestions which I make, are preliminary.
4
Vulnerability is lack of control over something that is of
interest to you. Let us assume that it is possible to adapt
our model to the conditions imposed by complex interdependence. Now, it is quite obvious that some part of that
lack of control derives from systemic,
impersonal factors
related to any one actor) and that it may vary over time
(not
(the
dynamism of
vulnerability) . Both these aspects will have to be
taken into account when attempts are made to construct a model
of vulnerability. The model, in other words, needs to be both
contextual and relational,
Having said this,
both situational and dynamic.
and with the critical comments on game
are indebted to Bachrach and Lawler, 1984 and to
Aslak
H e m e s , 1975 as well as to work done by an assistant,
Brun
during 1986-87. They will be developed further in a research
project on comparative foreign economic policies that was
initiated in 1987.
18
theory's simplications,
we may still draw some benefits from
adapting a simple two-actor model. The idea behind the model is
that it is possible to manipulate either the interest or the
control variable, or both. It may even be claimed that the
following model can be applied to multiple-issue and multipleactor relationships.
Examples of an element of interest are: a vital resource, a
commodity, access to technology or a market share, and a collective or an individual good
(to confine our examples and
the reasoning that follows to political economy) . Control is
effective power. When the two are combined, we have the
following classification of strategic options:
1 • The actor may reduce others'
control over that which
he himself is interested in.
2. The actor may reduce his interest in that which is
controlled by others.
3. The actor may increase his own control over that which
is of interest to others.
4. The actor may increase others'
interest in that which
he controls himself.
This classification is valid both for symmetrical
(typi-
cally bargaining)
(domination)
situations and for asymmetrical
relationships. But how realistic is it ?
The first hypothesis.
The debt case discussed above already shows that the first
of these propositions may be invalid. In that case,
in question (Mexico)
the actor
could benefit from the fact that
others controlled its financial situation through debt. The
Mexican Rescue apperars to have been decided upon and implemented
within a few hours. That is the kind of instant operation that
you expect from people who know that the threat comes from a
person sitting on a fire bomb: if it explodes, all of them will
go.
In the case of trade bilateralism,
there appears to be an
important element of cooperative strategy through shared
control of respective vulnerabilities. For those actors who
19
become parties to such bilateral deals,
it may be an efficient
substitute for multilateral rules. The national or corporate
interest would then take precedence over the collective.
all actors had access to bilateralism,
If
then the outcome
would be about the same as under the MFN clause or other nondiscrimination rules in GATT. That is most certainly not the
case:
some of the rationale for bilateralism is its selective
character,
its character as an individual or dual good.
To those parties involved,
bilateralism may offer more pre-
dictability, and hence less vulnerability,
than does no deal
at all. In times of rapid restructuring and change,
only the
monopolist and those who are sure of their competitive edge
are willing to risk the vote of the market indefinitely. This
is the logic behind the fact that more countries and corporations are fleeing the market than during any period since the
1930s.
Returning to the first hypothesis and its counter-hypothesis,
there is reason to doubt that the latter is more valid. Loan
financing has become more difficult for all but the most indebted
and the biggest debtors. The latter are big enough to represent a
real difference, a threat to the stability of the world financial
system.
Besides,
they are important economic and political
partners. For the rest, no such "special treatment" like that
accorded to Mexico and a few others is possible. On the contrary,
indications are that they have become more,
not less vulnerable
to the decisions of the core North than they were some years ago.
The second hypothesis.
Several studies highlight the power of the big importer. (Hir-
schman,
1945; Aggarwal,
1985) He may threaten the export-
er with closing down his imports. By doing that he will threaten
third parties with having to take over the diverted exports;
this makes domestic market producers more vulnerable.
Assuming in this case that the importer is big in terms of share
of international trade in the product,
he may use this position
- dependence on something of interest that others control - in
bargaining with exporters (and third parties)
stance,
in order, for in-
to obtain concessions in some other field (linkage polit-
20
ics) .
The third hypothesis.
Turning to the third of the four hypotheses that were presented
above,
the counter-hypothesis would be that an actor may reduce
his vulnerability the more he reduces his control over some
element of interest to others. Think of the vulnerable position
of a small Third World country attempting to exercise national
control over its own resources, which might be some strategic
mineral and which might also be under the control of a big power
or corporation
(or both) . This is definitely not to say that the
country concerned had bette give up exercising such control
(something that many a country has had to do) . It only emphasises
that economic nationalism and national vulnerability may have to
live side by side. Some Central American countries have probably had experiences with such a situation.
The more obvious example to which the counter-hypothesis may
apply is, again, the debt crisis. For several of the huge
debtors,
includind Mexico,
it may be said that they did not
control that element which was in the interest of the creditors:
that loan commitments were being met. And this lack of control
was indirectly working as a bargaining chip because the countries
concerned were believed by creditors when they told them they
were out of control. Creditors simply, in their own interest, had
to come to the rescue. Now, there is obviously an appendix to
this conditionality. The price tag attached to extending new
loans to finance repayment of old ones is a matter for discussion
in some other context. Suffice it to say that it may represent a
greater - or a real - vulnerability at some future time if or
when it turns out that the fuit en avant that both parties make
in handling the crisis or in postponing it,
is no longer possible.
Again the write-offs of debt that started in 1986-87 are proof
that parties have begun to realise this.
The fourth hypothesis.
The fourth and final hypothesis says that you reduces your own
vulnerability by increasing the interest of others in something
that you control yourself. But as Bachrach and Lawler show, your
21
partner in such a process may get a stronger urge to pressure or
to work on you in other ways in order to extract concessions from
you
(op.cit. p. 64) The interest dimension in this case clearly
has a double edge.
A low level of interest in you from others may be an advantage
if you are without the power to icnfluence them. In this case,
self-sufficiency would seem to be an optimal choice. This seems
especially true if you are yourself strongly interested in the
item concerned. A small producer of a strategic mineral might be
wise to process it before export, or better, using it as a base
for the purpose of manufacturing goods to be consumed at home.
In some cases an item that is small per se in terms of its
interest to others, may have a large interest in a wider,
systemic perspective. Again the Peruvian debt policy after 1985
is a case in point. For the creditors, Peru's accumulated debt as
well as the annual repayments due on it had little impact on
their own financial position. The weight of the Peruvian debt was
and is a function of the perceived impact on the other debtor
countries of the Peruvian policy of restricting repayment. The
fear of a debtor cartel may be exaggerated. The fear of some sort
of a domino effect may be much more real.
Conclusions.
The purpose of the paper was a multiple one. First,
the epiBtemology of interdependence,
I discussed
selecting the vulnerability
dimension as both the more relevant and the more interesting one.
I made a strong point about the role of power and its implications for vulnerability analysis. In that connection, I made a
special point about the possibility that weak or inferior party
in a relationship of asymmetrical power distribution,
in fact may
exercise power. Potential power is not necessarily effective
power. On the other hand, impotence in a structural relation of
power asymmetry may turn out to be potent at the end.
Then I made a point of opposing four hypotheses with their
counter-hypotheses. That exercise showed that the four strategies
for reducing vulnerability were only partially resistant to
changes in environmental conditions.
From that, one may conclude that more case studies are
necessary if theory is to be developed further. Moreover, there
22
is a need to differentiate better between various aspects of
power on the one hand and the relationship between power
(potential) and structure of a given relationship on the other
hand.
Finally, we need to posit the discussion of interdependence
and vulnerability in a context of systemic causes and effects.
The vulnerability position of actors is not only conditioned by
changes of a general systemic nature
races,
(stagflation,
restructuring
etc) . Strategies to cope with vulnerabilities also affect
systemic variables. In some cases, paradoxically, systemic
effects may make it easier to remain vulnerable. Or several
vulnerability-affected actors may find it opportune to seek collective solutions to their problem. Bilateralism in world trade is
partly explained by this factor. One may also find examples of
collective or cooperative solutions involving several actors at
the same time.
Interdependence is a loose concept, but it may be made both
more precise and quite fruitful if it is developed. If it is not,
it will finally end up as a phrase for the rhetorics of international politics and of foreign policy.
*)
I am indebted to Olav Schram Stokke, Aslak Brun, Dag Harald
Claes and to participant at the Groningen conference, November
1986 for comments on the draft. The final result is however all
my own responsibility.
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