ABSTRACT
This chapter analyzes a different aspect of the policy of border hardening: the impact it may have on cross-country flows of human capital and goods. The multilateral approach to counterterrorism, while appearing a co-operative solution, will in fact emerge because ‘private’ costs of international terrorism will shift progressively from the United States to the other members of the club. One way to compensate for the adverse economic effect of a more secure border is to create a security perimeter that encompasses countries with similar preferences and standards for the fight on terrorism. While there is agreement that a border represents a discontinuity in trading costs, the open question remains about the size of this discontinuity. The savage attacks on the United States of 11 September 2001 fundamentally altered the attitude and policy of the leader of the industrial democracies with respect to international terrorism. Unilateralism has characterised the initial phase of this policy.
