Trade Blocs, Trade Flows, and International Conflict

TLDR

Foreign trade’s relationship to political conflict has long been debated, yet prior studies have largely examined trade flows alone while overlooking the institutional context of trade. The authors contend that membership in preferential trading arrangements reduces the propensity for military disputes and that rising trade within such arrangements further suppresses conflict. They analyze post‑World War II data on trade flows and conflict, applying quantitative methods to assess the impact of preferential trading arrangements. Their results confirm that trade flows have minimal effect on disputes between non‑PTA states, whereas within PTAs higher trade is strongly associated with lower conflict likelihood.

Abstract

The relationship between foreign trade and political conflict has been a persistent source of controversy among scholars of international relations. Existing empirical studies of this topic have focused on the effects of trade flows on conflict, but they have largely ignored the institutional context in which trade is conducted. In this article we present some initial quantitative results pertaining to the influence on military disputes of preferential trading arrangements (PTAs), a broad class of commercial institutions that includes free trade areas, common markets, and customs unions. We argue that parties to the same PTA are less prone to disputes than other states and that hostilities between PTA members are less likely to occur as trade flows rise between them. Moreover, we maintain that heightened commerce is more likely to inhibit conflict between states that belong to the same preferential grouping than between states that do not. Our results accord with this argument. Based on an analysis of the period since World War II, we find that trade flows have relatively little effect on the likelihood of disputes between states that do not participate in the same PTA. Within PTAs, however, there is a strong, inverse relationship between commerce and conflict. Parties to such an arrangement are less likely to engage in hostilities than other states, and the likelihood of a military dispute dips markedly as trade increases between them.