Wed 22 May 2019:
A new study in “Oxford Economic Papers” suggests that developed counties may see significant economic gains from their efforts to combat terrorist threats.
Developing counties, in contrast, appear to suffer economically from counter-terrorism threats. Major trading countries, such as the United States, or trading blocs, such as the European Union, are targets of terrorist organizations. Typically, these groups, such as al-Qaeda or ISIS, are present in developing countries that lack the resources to stop them from operating.
During the last two decades, this resource scarcity has often been complemented by radical ideologies that can be more easily implanted among disaffected people, thereby supplying terrorist recruits. As a consequence, terrorist hotbeds emerged in remote and difficult-to-govern areas like Afghanistan, Pakistan, Somalia, Syria and Yemen. In order to protect themselves against such attacks, targeted countries deploy defensive counter-terrorism measures at home, which deflect attacks abroad.
In addition, terrorism disrupts the production of goods and services in an economy, affecting global supply and demand of goods, thus changing trade patterns and the prices of imports and exports.
With their limited means, terrorist organizations target both types of countries. Greater defensive counter-terrorism by either country reduces terrorism at home, but potentially increases it in the other country as the terrorist group redirects its attacks. Such defensive measures may take the form of enhanced border security and greater surveillance.
Counter-terrorism efforts limit the production of manufactured goods through demand for closely related resources. Guns, surveillance cameras, helicopters, police vehicles, communication grids and other manufactured goods are required for effective defensive counter-terrorism efforts. Defensive measures also require labor in terms of guards and police, who must have equipment to protect potential targets and coordinate defensive operations.
The study investigates the interplay of trade and terrorism under free trade between a developed nation that exports a manufactured good to and imports a primary product from a developing nation. Terrorist organizations target both types of nations and reduce their attacks in response to a nation’s defensive counter-terrorism efforts. This reality leads the developed nation to raise its counter-terrorism efforts, compounding its overprovision of these measures.
By contrast, developing nations limit their defensive countermeasures due to the falling price of their exports. Researchers considered a developed (United States) and a developing country (Pakistan) with two goods—manufactured and primary. The developing country imports the manufactured good and exports the primary product. The developed country imports the primary product but exports the manufactured good to developing countries.
When deciding which defensive counter-terrorism measures to pursue, the developing country must weigh trade loss against its gain from containing terrorism at home.
While the developed country, whose independent defensive choice not only augments the country’s trade position as manufactured goods, which it produces, become relatively more expensive, but also deflects potential attacks abroad. Thus, the developed country has an incentive to increase its defensive measures.
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