International Finance Discussion Papers (IFDP)
December 1990
Mercantilism as Strategic Trade Policy: The Anglo-Dutch Rivalry for the East India Trade
Douglas A. Irwin
Abstract:
This paper provides a reinterpretation of seventeenth-century mercantilist trade doctrine and policy in light of recent theories of strategic trade policy. Mercantilist economic thought, like strategic export-promotion theories, emphasized the use of government policy to capture rents that arise from imperfect competition in international trade. The economic structure of the Anglo-Dutch rivalry for the East India trade provides an excellent illustration of an environment in which the profit-shifting motive for strategic trade policies exists. Using data from the seventeenth-century East India trade, I find that the scope for strategic trade policies was clearly present, although the gains from such policies were probably quite small and are highly sensitive to assumptions about demand.
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