WEBINAR RECORDING · 2024-09
Trade and Geopolitics During the Cold War: Lessons for the Future
In this conversation: Benedikt Heid; discussant Costanza Bosone; moderators Ben Shepherd and Hanna Norberg.
The Iron Curtain sharply restricted trade, but its permeability changed over time. Benedikt Heid and Costanza Bosone use the historical evidence to question simple bloc narratives—and explain why modest aggregate welfare estimates should not be mistaken for harmless fragmentation.
Session information draws on the recording and its original description. Affiliations and policy context refer to the time of the webinar.
FROM THE CONVERSATION
Three takeaways.
What they mean in practice.
Prepared from the session recording using automatic transcription and editorial review. Follow the timestamp links for the original wording and context.
The Iron Curtain was a changing barrier
Watch 20:05 ↗Heid presents new digitized Eastern-bloc trade data combined with historical trade records. The estimated tariff equivalent of the East–West barrier falls from roughly 44% in 1950 to around 20% before the Cold War ends, then declines further. These are inferred equivalents, not observed tariff rates: the result challenges the image of an impermeable, constant divide.
Policy interpretation: Assess the intensity and evolution of restrictions rather than treating membership in rival blocs as a complete description of economic separation.
Small welfare percentages can conceal consequential losses
Watch 49:00 ↗The counterfactual shows much larger East–West trade without the barrier. In discussion, Heid stresses that reported real-income effects are recurring level differences, not one-off costs. The static model omits innovation, critical-input vulnerabilities, and localized adjustment; a modest aggregate percentage cannot establish that fragmentation is economically unimportant.
Policy interpretation: Report the time horizon, omitted mechanisms, and distribution of losses alongside aggregate estimates; do not compound a static level effect as a growth-rate loss.
History informs present risks without providing a forecast
Watch 33:02 ↗Responding to Bosone, Heid distinguishes contemporary interdependence from the much smaller historical trade relationships. Connector countries can receive diverted business, but rerouting under sanctions is not automatically a welfare improvement. Smaller economies can also face pressure to choose sides.
Policy interpretation: Evaluate connector-country opportunities alongside political exposure and actual additional production; bilateral trade growth alone does not demonstrate new global gains.
From the discussion
At 42:02, Shepherd asks whether the estimated barrier represents iceberg trade costs or fixed costs. Heid explains that the dummy captures a complex, partly endogenous policy bundle and acknowledges the aggregate treatment’s limits. At 54:00–56:00, a data question clarifies that flows are aggregate and domestic trade is proxied using GDP minus exports. These qualifications matter for mechanism and counterfactual interpretation.
