Winning and losing trade sectors of the State Partnership Program

This paper investigates the impact of the United States Department of War's State Partnership Program (SPP) on state-level sectoral exports. Utilizing a comprehensive sectoral dataset covering the years 2009 to 2024 and employing a Poisson Pseudo-Maximum Likelihood estimation strategy with high-dimensional fixed effects, we analyze whether these security cooperation relationships generate positive spillovers for sector-level state exports. The results suggest that the SPP acts as a significant catalyst for exports in sectors such as animal production, footwear manufacturing, and railroad rolling stock, but it is associated with a decline in exports for sectors like logging, aluminum production, and glass manufacturing. This divergence can be attributed to the SPP's reliance on subject matter expert exchanges to foster comparative advantage in knowledge-intensive sectors by lowering coordination costs, while offering no material benefit to capital-intensive heavy industries. These findings highlight the complex, sector-specific economic dimension of security partnerships and offer crucial insights into the distributional consequences of defense diplomacy.