Does trade prevent or promote interstate conflict initiation?

Abstract

Competing theories argue, respectively, that more trade reduces, increases, or does not affect interstate military conflict. We offer a new general theory on how trade affects conflict, which encompasses the liberal logic and the neo-Marxist/neo-mercantilist mechanism of asymmetric dependence and offers alternative explanations to the effects predicted by the bargaining and classical realist approaches. If a country expects its conflict toward a target to reduce the price of its import from or increase the price of its export to a target, it has an economic incentive to initiate conflict, and vice versa. These expectations can vary across trade flow directions and economic sectors. Using our model, we predict the effects of increases in exports and imports in five sectors on military conflict initiation. Statistical analysis of directed dyads from 1970 to 1997 largely supports our predictions. Rises in the initiator’s imports of agriculture/fishery, energy, and chemical/mineral goods and exports of miscellaneous consumption goods reduce the likelihood of conflict initiation; rises in the initiator’s exports of energy and both imports and exports of manufactured goods increase the likelihood. We evaluate implications for the literature and public policy.