STATE POWER AND INTERNATIONAL TRADE 319 STATE PREFERENCES Historical experience suggests that policy makers are dense,or that the assumptions of the conventional argument are wrong.Free trade has hardly been the norm.Stupidity is not a very interesting analytic category.An alternative approach to explaining international trading structures is to assume that states seek a broad range of goals.At least four major state interests affected by the structure of international trade can be identified.They are:political power,aggregate national income, economic growth,and social stability.The way in which each of these goals is affected by the degree of openness depends upon the potential economic power of the state as defined by its relative size and level of development. Let us begin with aggregate national income because it is most straightforward.Given the exceptions noted above,conventional neo- classical theory demonstrates that the greater the degree of openness in the international trading system,the greater the level of aggregate economic income.This conclusion applies to all states regardless of their size or relative level of development.The static economic bene- fits of openness are,however,generally inversely related to size.Trade gives small states relatively more welfare benefits than it gives large ones.Empirically,small states have higher ratios of trade to national product.They do not have the generous factor endowments or po- tential for national economies of scale that are enjoyed by larger- particularly continental-states. The impact of openness on social stability runs in the opposite direc- tion.Greater openness exposes the domestic economy to the exigencies of the world market.That implies a higher level of factor movements than in a closed economy,because domestic production patterns must adjust to changes in international prices.Social instability is thereby increased,since there is friction in moving factors,particularly labor, from one sector to another.The impact will be stronger in small states than in large,and in relatively less developed than in more developed ones.Large states are less involved in the international economy:a smaller percentage of their total factor endowment is affected by the international market at any given level of openness.More developed states are better able to adjust factors:skilled workers can more easily be moved from one kind of production to another than can unskilled laborers or peasants.Hence social stability is,ceteris paribus,inversely related to openness,but the deleterious consequences of exposure to the international trading system are mitigated by larger size and greater economic development.STATE POWER AND INTERNATIONAL TRADE 319 STATE PREFERENCES Historical experience suggests that policy makers are dense, or that the assumptions of the conventional argument are wrong. Free trade has hardly been the norm. Stupidity is not a very interesting analytic category. An alternative approach to explaining international trading structures is to assume that states seek a broad range of goals. At least four major state interests affected by the structure of international trade can be identified. They are: political power, aggregate national income, economic growth, and social stability. The way in which each of these goals is affected by the degree of openness depends upon the potential economic power of the state as defined by its relative size and level of development. Let us begin with aggregate national income because it is most straightforward. Given the exceptions noted above, conventional neo￾classical theory demonstrates that the greater the degree of openness in the international trading system, the greater the level of aggregate economic income. This conclusion applies to all states regardless of their size or relative level of development. The static economic bene￾fits of openness are, however, generally inversely related to size. Trade gives small states relatively more welfare benefits than it gives large ones. Empirically, small states have higher ratios of trade to national product. They do not have the generous factor endowments or po￾tential for national economies of scale that are enjoyed by larger￾particularly continental-states. The impact of openness on social stability runs in the opposite direc￾tion. Greater openness exposes the domestic economy to the exigencies of the world market. That implies a higher level of factor movements than in a closed economy, because domestic production patterns must adjust to changes in international prices. Social instability is thereby increased, since there is friction in moving factors, particularly labor, from one sector to another. The impact will be stronger in small states than in large, and in relatively less developed than in more developed ones. Large states are less involved in the international economy: a smaller percentage of their total factor endowment is affected by the international market at any given level of openness. More developed states are better able to adjust factors: skilled workers can more easily be moved from one kind of production to another than can unskilled laborers or peasants. Hence social stability is, ceteris paribus, inversely related to openness, but the deleterious consequences of exposure to the international trading system are mitigated by larger size and greater economic development