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TERMS AND CONCEPTS The Concept of Interdependence: Current American Thinking ROBERT O. KEOHANE This presentation reviewed recent work, mostly in the United States, on the politics of international economic interdependence. It began by defining interdependence in terms of situations characterized by reciprocal effects across borders. These effects may be military (strategic) or economic, but they may also be political: such effects exist in situations in which conditions of rule in one country (or its government's attitude toward other countries), depend on the policies followed by other governments. Interdependence implies not just interconnectedness (or sensitivity to one another), but vulnerability: that is, in a situation of interdependence, costs can be imposed by the actions of one party on the other. For either side to disrupt established patterns of relations tends to impose costs on its partner, as well as on itself. INTERDEPENDENCE, POWER, AND CONFLICT Despite what one sometimes hears from liberal enthusiasts, interde- pendence does not make power obsolete. On the contrary, asymmetrical interdependence is a basis for power: potential power accrues to the less dependent actor in a relationship (although this potential power may or may not be used effectively, and actors with intense preferences may do better in bargaining than expected on the basis of asymmetries in inter- dependence). Some examples of the implications of interdependence for power relationships follow: The existence of vastly unequal nuclear or conventional forces between the United States and the Soviet Union could put the side with inferior forces in a weak bargaining position. 37

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38 SOVIET-AMERICAN DL4LOGUE IN THE SOCL24L SCIENCES U.S. concern about the Soviet gas pipeline to Western Europe in 1982 was based on concern about asymmetrical interdependence. The "informal imperialism," or neocolonialism, of capitalist states over countries in Asia, Africa, and Latin America has been based on asymmetrical economic, political, and military interdependence, in many cases characterizable as hegemony. Although interdependence does not make power obsolete, it may change the incentives for the exercise of power and the means used: Strategic interdependence in a nuclear age has created incentives for at least limited cooperation to avoid nuclear war. Economic interdependence among advanced capitalist states has created incentives for substantial cooperation in order to facilitate trade. This cooperation is not automatic: Germany and Britain were each other's best trading partners in 1914, but they went to war nevertheless. Economic incentives for trade may be overshadowed by concerns about military advantages, as has been the case for East-West trade since 19413. The global nature of communications means that the mass media can have profound impacts on the politics of countries as a result of events in other countries for example, movements for democratization in formerly authoritarian polities. There may result opportunities for governments of certain countries to attempt to influence other countries' domestic politics. Since interdependence has implications for power relationships, it can generate as well as ameliorate conflict. More significantly, it may change the terms of conflict. The nature of convict as a result of interdependence will, however, depend on the character of international institutions and general political relations among the interdependent entitiesstates, multinational corporations, or transnational movements. In the context of hostility and territorial exclusivity, interdependence can intensify conflict, as it did in Japanese-American relations between 1939 and 1941. In the context of economic openness and cultural empathy, interdependence can reduce the magnitude and severity of conflict, although it may substitute many minor points of friction for a few critical foci of hostility. European economic integration, for example, has increased the number of issues of contention but greatly decreased their potential for resulting in violent conflict, as compared to the situation before 1939. In general, the approach to interdependence outlined here incorpo- rates elements of bargaining within an overall institutional context. Changes in the intensify of asymmetry of interdependence help to alter the terms of bargaining but do not make bargaining obsolete; how they affect bargaining

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TERMS AND CONCEPTS 39 depends critically on the rules and norms of the prevailing international regimes. HISTORICAL VARIATIONS IN INTERDEPENDENCE Interdependence is not a new phenomenon. Consider, for instance, relations between the United States and Britain between 1776 and 1815. Interdependence existed at both the security and the economic level. The American seaboard could be threatened, except toward the end of the Revolutionary War as a result of French intervention, by the British fleet. But conversely, British control of Canada could be jeopardized by American invasion. With respect to economic interdependence, the triangular trade between the United States, the British West Indies, and Great Britain was important to both sides; the United States even attempted to use boycotts and embargoes against Great Britain, although not very effectively. Despite the historical continuity of interdependence, the intensity of interdependence has increased. Economic interdependence has increased greatly among the ad- vanced capitalist states since World War II especially interdepen- dence of financial markets (although world financial markets have been linked in significant ways for well over a century). Strategic interdependence has become worldwide due to nuclear weapons and other technological changes. Mass communications have made political conditions within coun- tries depend increasingly on events outside them. Perhaps most important, the variety of actors engaged in interde- pendent relationships has increased. "Complex interdependence" means that there are multiple actors involved, especially in the advanced capitalist world: governments, corporations, social and political movements, religious organizations, networks of scientists, nonprofit lobbying organizations, and many others. These actors have multiple channels of influence between bureaucracies below the level of top political leadership, and in a variety of ways between societies. POLICY INTERDEPENDENCE AND INSTITUTIONS If the military and economic fates of nations are interdependent, it will often be costly not to coordinate policies. That is, from intensified inter- dependence we can infer either increased policy coordination or unwanted conflict. But political interdependence provides opportunities for governments to influence others' domestic policies or public policy environments. These

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40 SOV7ET-AMERICAN DIALOGUE IN THE SOCKS SC ENCES issues may become linked to economic and military issues, which may also be linked to one another. This suggests an important research question: Under what conditions does linkage facilitate, and under what conditions does it impede, cooperation? In international relations, policy coordination cannot be legislated from above, nor can governments rely on one another's goodwill alone. Reci- proci~ is the central norm governing international relations. Reciprocity can be defined as exchanges of roughly equivalent values in which the ac- tions of each party are contingent on the prior actions of the others in such a way that good is returned for good and bad for bad. Reciprocity gov- erns not only U.S.-Soviet relations but attempts by the advanced capitalist countries to regulate their economic relations. Reciprocity does not guarantee cooperation. Biased notions of equiva- lence can distort perceptions, and strategies of reciprocity can lead to mutual retaliation and deadlock. Consider the fate of detente in the 1970sa fail- ure of reciprocity due to ambiguity and mutual ambition. This review of reciprocity suggests the following research question: What different forms of reciprocity can be distinguished, and under what conditions do these strategies of reciprocity lead to mutually beneficial cooperation? Cooperation on a sustained basis also requires regular rules and practices that is, institutions. Political scientists have borrowed the term "international regimes" from international lawyers to describe these insti- tutions; now policymakers are using this language. What do regimes do in situations of interdependence? They reduce the costs of transactions by regularizing them and making them routine. They provide information (practices for verification in arms con- trol regimes; monitoring and information exchange in economic regimes). They reduce uncertainty by developing expectations of compliance with rules. Regimes do not impose rules on sovereign states. They are devices that governments use to facilitate their cooperation with one another. Research is needed on the following questions: Under what conditions are international regimes instituted? What causes changes in international regimes? What are the sources of compliance or noncompliance with their rules? Finally, we should reflect on implications for the American-Soviet relationship. International economic regimes among the advanced capitalist states are much more highly developed than the U.S.~oviet regimes. For extensive cooperation, a much more elaborate and clearer set of mutually agreed-upon rules would be necessary. We need to ask what sequence of

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TERMS AND CONCEPTS 41 regime development would be most likely to be cumulative and mutually beneficial to U.S.~oviet relations? SUMMARY Increasing interdependence is significant, not because it substitutes for power and bargaining but because it alters the conditions under which bargaining takes place. Increasing interdependence economic, strategic, and political leads either to disorder and conflict or to increasing policy coordination. Neither is inevitable; the direction taken depends on human action and the character of international institutions. Policy coordination is usually based on strategies of reciprocity and is facilitated by appropri- ate international regimes. American and Soviet scholars and policy makers should be thinking about what sorts of international regimes could help pro- gressively to institutionalize peaceful and mutually beneficial relationships between these two societies.