Tuesday, December 7, 2010

The Dalai Lama effect on international trade

Since the Nobel Peace Prize was announced this year, the Chinese government has been putting heavy pressure on many foreign authorities to prevent them from showing up at the award ceremony. China has been in particular been using the threat of trade sanctions to ruin the party of Liu Xiaobo. Is this effective?

Andreas Fuchs and Nils-Hendrik Klann note that China is a regular with these tactics, but regarding contacts with the Dalai Lama. Are those threats carried out? Using a gravity model, they find exports to China have been curtailed after high-level visits only recently, and this effect vanishes after two years. This is quite interesting, as it confirms the existence of a "Dalai-Lama effect." But I wonder how this effect could appear at a time where the Chinese government has less control over imports with the liberalization of the economy. Is it that it cares that much more about the Dalai Lama?

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