Opening the Doors to International Trade: New Evidence for the Effectiveness of Export Promotion

Can government agencies influence economic activity? Most research in political science assumes that government involvement in international trade is limited to negotiating and signing agreements, and that firm preferences and behavior are instead the main drivers of international trade. We argue that the government plays a larger role by actively promoting exports, and this reflects public officials’ own preference for policies that help domestic firms reap the benefits of trade without harming firms disadvantaged by imports. These efforts work by solving an information problem, both connecting foreign firms with their American counterparts and helping U.S. firms find overseas markets for their goods. We test our argument using a new dataset drawn from U.S. State Department communications. We find strong evidence that more diplomatic cables promoting trade lead to more exports with a country, and that this finding is robust to different tests for endogeneity. Governments can lead trade policy rather than just react to firms’ preferences.

Recommended citation: Raymond Hicks , Matthew Connelly, & Nathan Fabius. 2024. "Opening the Doors to International Trade: New Evidence for the Effectiveness of Export Promotion"