Technology, Geopolitics, and Trade

Leo C.H. Lam () and Ana Maria Santacreu

No 2025-029, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We study when unilateral export controls are optimal by quantifying how geopolitical rivalry reshapes trade in ideas. Empirically, cross-border technology flows are far more sensitive than goods trade to geopolitical distance, especially where IPR is weak, and these penalties intensify after 2017. Motivated by this evidence, we build a growth–trade model in which geopolitical distance raises breach risk in licensing; firms partially reprice risk via higher royalties but cannot fully insure quantities. In a consumption-only benchmark, a permanent rise in US–China geopolitical distance yields modest net gains for the United States, implying no benchmark motive for controls. Once governments place weight on national security, measured as relative technological leadership, controls can be welfare-improving despite efficiency costs. When the probability of Chinese retaliation rises with control tightness, the optimal policy is strictly interior (tighter than laissez-faire yet below a full ban).

Keywords: geopolitics; international trade; strategic rivalry; technology transfer (search for similar items in EconPapers)
JEL-codes: F63 O14 O33 O34 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2025-10-21, Revised 2025-10-22
New Economics Papers: this item is included in nep-ifn and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.20955/wp.2025.029 Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:101980

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2025.029

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().