DP13139 Agent Orange: Trump, Soft Power, and Exports

Author(s): Andrew K Rose
Publication Date: August 2018
Keyword(s): approval, data, empirical, Gallup, Gravity, international, leadership, panel, positive
JEL(s): F14, F59
Programme Areas: International Trade and Regional Economics, International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13139

A country's exports rise when its leadership is approved by other countries. I show this using a standard gravity model of bilateral exports, a panel of data from 2006 through 2017, and an annual Gallup survey which asks people in up to 157 countries about whether they approve of the job performance of the leadership of China, Germany, Russia, the United Kingdom and the United States. Holding other things constant, a country's exports are higher if its leadership is approved by the importer, since; 'soft power' promotes exports. The Gallup effect is statistically and economically significant; a one percent increase in leadership approval raises exports by around .66 percent. This effect is reasonably robust and different measures of soft power deliver similar results. I conservatively estimate that the >20 percentage point decline in foreign approval of American leadership between 2016 (Obama's last year) and 2017 (Trump's first year) lowered American exports by at least .2% or >$3 billion.