Terrisom and Morden Usa

While the impact of terrorism on trade may vary across time and place, violence and

warfare generally imply additional costs for transactions so that, if anything, we would expect

a negative association between terrorist activity and the volume of trade. More specifically,

there are at least three principle ways in which warfare may be a hindrance to international trade. First, terrorism leads to insecurity and thereby raises the costs of doing business. Alvin

Buckelew (1984, p. 18) defines terrorism as “violent, criminal behavior designed primarily to generate fear in the community, or in a substantial segment of the community, for political purposes” (emphasis added). Depending on the dimension of terrorist attacks, people may become increasingly confused, get nervous, or feel generally less safe. For instance, after “18 months of random violence that has killed close to 400 citizens, injured thousands, and distressed millions, … the atmosphere in Israel [is] a mix of defiance and des The Economist, March 30, 2002). Also, the collapse of the twin towers on September 11, 2001 was a laming shock to the US economy. As a result, terrorism may even lead to a change in a country’s consumption and production patterns (e.g., Israelis now prefer malls instead of markets and walk in the streets instead of taking buses), thereby affecting the pattern of international trade. But terrorism-induced insecurity may also have a direct negative effect on trade. Since the economic impact of terrorist bombings and shootings are hardly predictable, existing business plans may quickly become obsolete so that firms generally face larger risks.

This insecurity may reduce the attractiveness of this market for international producers.

Second, the typical response to an increase in terrorist activity is an increase in

security measures. Stronger regulations, however, imply that trade becomes more expensive,

e.g., by increasing delivery times. For instance, after the terrorist attacks on September 11,

2001, US borders were temporarily closed; trucks on the border between Canada and the US

have had to wait up to 20 hours for a crossing that normally takes minutes. El Al, Israel’s

airline, generally holds goods for a day for security