Pranesh HP

Trading War For Peace

The debate over whether and how international commerce and increased global connectivity
alters the foreign policy of states, and in particular the decision for war, has been one for the
ages in the field of international relations.

The most common assertion is that trade augments peace by establishing communication and
transnational ties that increase understanding and cultural sharing among societies as well as
the potential for cooperation. By forging and expanding an international web of commerce
through specialization, trade makes war less likely by increasing the costs of severing such
economic links. Interdependence makes conflict less likely because of its efficiency over
conquest in acquiring resources necessary for growth and prosperity. (McDonald 2004)

Early in history, theorists banked on the latter, hoping that international commerce would
somehow quell the passion for conquest that seemed so prevalent in the seventeenth and
eighteenth centuries. Instead of invading, nations could now trade with states in order to get
access to resources and also gain access to a big market where their mass-produced goods can
be sold at a reasonable profit. Commerce was generally viewed as a "powerful moralizing
agent. (McMillan 1997) Modern conditions too weigh in the favour of a predominantly
trading based system. The advent of the nuclear bomb and a quantum leap in technology
greatly increases the costs and risks of aggression, making wars of conquest seem ‘suicidal’
and the peaceful trading option considerably all the more rational. (Copeland 1996)

Apart from directly influencing state behaviour, increased connectivity and economic
interdependence also sways individual people against war. The ties among people in
commercial relationships are thought to be inherently pacific. This argument can be found in
the works of Montesquieu where its main thrust is that "the simple act of communication
paves the way to international cooperation by increasing each people's knowledge of others
and their ways, customs, practices, and concerns" (McMillan 1997) A multitude of
researchers have convincingly pinpointed the fact that the cultural dimension is often at the
heart of peace-building processes. Culture is the element that gives us the context that we use
to shape our perceptions and judgements.
Commercial relations also render individual private traders and consumers dependent on
access to foreign markets. Because political hostility risks disrupting economic relations
between participants and endangering the gains from trade, these actors often resort to
pressing public officials to avoid military conflicts. (Mansfield and Pollins 2001) The theory
best functions in the paradigm of a democracy, since leaders elected by popular opinion are
reasonably believed to be more sensitive to the needs of domestic constituents. As in the case
of the Kantian conception of liberal political restraint on warlike monarchs, leaders may still
want to go to war, for territorial or nationalistic reasons. However, the disruption of
commerce associated with war leads domestic constituents to oppose these other objectives.
As a result, a leader, who for political support, relies on societal actors that want to
preserve/bolster their country's economic performance naturally will avoid or de-escalate
fighting, despite his or her initial preferences on the matter. (Gartzke and Zhang 2015)
(Mansfield and Pollins 2001) Some argue that this can further be supported by shifting to a
free trade based system. Free trade simultaneously transformed the domestic distribution of
power by eliminating economic regulations such as protective tariff barriers that strengthened
societal groups most likely to support war. It reduces military conflict in the international
system by undermining the domestic political power of interests that benefit from conflict
and by limiting the state's ability to enact commercial policies to build domestic coalitional
support for its war machine. (McDonald 2004)

The recent years have also seen the rise of civil wars and wars of secession. Trade enables
countries to capitalise on their natural resources, which in fragile countries often represent a
solid chunk of economic resources. This affects the potential for conflict; countries with more
stable economies and by extension employment are less likely to nourish revolutions, and
also in the worst of cases, provides funds to the government which can be used to repress or
buy off rebel groups in order to restore peace, albeit a totalitarian one. Besides increasing
real incomes and thus individuals’ opportunity costs of engaging in violence, in many fragile
countries, trade regimes have provided essential consumption goods to households, especially
food. Moreover, well executed trade regimes increase real incomes by improving efficiency
and providing opportunities for exports while making sure there are no sharp, adverse
changes in the prices households face on the goods they consume or produce. (Calì 2015)

In a rationalist paradigm, wars often arise due to uncertainty about an opponent’s resolve and
capabilities. Both sides usually resort to exaggerating the level of their commitment, hoping
that their adversary will back down. In these cases, military escalations occur when leaders
miscalculate an opponent's willingness to fight, assuming that the adversary is bluffing when
in fact they are not. Thus, they often try to demonstrate their commitment through aggressive
military acts. (Fearon 1995)

Economic interdependence serves the role of a middle rung in the escalation ladder between
peace and war. Making threats or taking actions that harm commerce is costly to both parties
in an interdependent relationship. Therefore, as the degree of economic interdependence
increases, the weight that threat carries rise as well. Now, leaders now have an option to
display their resolve that does not involve military escalation. (Gartzke and Zhang 2015)
Also, while it can be conceded that further escalation might be initiated by the adversary in
response to an economic action, the existence of a middle option should logically result in a
net reduction of military escalation since previous to the formation of this option, escalation
occurred regardless and with its presence, several other cases could simmer down.

While most of the empirical studies provide murky results and not a direct answer on whether
economic interdependence reduces the outbreak of war, there also exist some fragments of
data that tip the scales in favour of the argument. Higher levels of economically important
trade, as indicated by parameters such as the bilateral trade-to-GDP ratio, are associated with
lower incidences of militarized interstate disputes and war, even controlling for potentially
confounding, theoretically interesting influences such as geographic contiguity, the balance
of power, alliance bonds, and economic growth rates. Some results also show trends where
wars are preceded by decreasing levels of bilateral trade. (Oneal and Russett 1997)

However, even in the scenario where current trade is has decreased or is virtually non-
existent, positive expectations for future trade can aid in producing a positive expected value
for trade, and therefore an incentive for continued peace. This in fact helps decipher the two
major periods of detente between the Cold War superpowers, from 1971 to 1973 and in the
late 1980s when positive signs from U.S. leaders that trade would soon be significantly
increased coaxed the USSR into a more cooperative relationship, reducing the probability of
war. It has to be noted conversely that in situations of low trade where it appears there is no
prospect that high trade levels will be restored in the future, highly dependent states may be
pushed into conflict. This was the German and Japanese dilemma before World War II.
(Copeland 1996)

Some wars, especially ones borne out of negative trade expectation could potentially be
attributed to a lack of communication by states who failed to effectively utilize the
advantages trade provided for the maintenance of peace. Wars could also result from the
misperceptions of individual leaders caught up in the outmoded belief that war still pays. In
short, if leaders fail to see how unprofitable war is compared to the benefits of trade, they
may still erroneously choose the former. (Copeland 1996)

Nonetheless, critics of the central assertion have not been stilled. Several observers maintain
that, rather than fostering cooperation, heightened economic interdependence inevitably
generates political discord. They argue that the gains from trade often do not accrue to states
proportionately and the distribution of these gains can affect interstate power relations.
Shifting power relations, in turn, are widely regarded as a potent source of military conflict.
(Mansfield and Pollins 2001) Such realist theories of war often cite economic development as
the primary internal mechanism for increasing state power. The connection is indirect;
economic growth allows for more internal balancing and the accumulation of military. Trade
is generally believed to increase economic efficiency and therefore the size of the surplus.
(Mearsheimer 2001) Another argument is that great powers do not depend on a trading
relationship as compared to another partner, the costs associated with attenuating or
completely dissolving the relationship are far lower for the former than the latter. Under these
circumstances, trade may do little to inhibit the less dependent great power from initiating
hostilities. (Mansfield and Pollins 2001) Economic realists also posit that dependent actors,
worried that others participants might cut them off from access to vital raw materials,
investments, and markets, may seek to reduce their vulnerability through the extension of
military power abroad and direct occupation of crucial trading partners. (Copeland 2015, 428-
446)

One of the counters to this realist paradigm is that when nations reach a minimum level of
security that guarantees their survival, they do not necessarily use up the surplus from trade to
amass further military might. In most cases the surplus is used to improve things like standard
of living, education, etc, things usually prioritised in the domain of liberalism. Likewise,
realists cannot explain why great powers might exist within a cooperative economic
relationship for years without falling into war. Also, while great powers surely have more
than enough labour and capital to foster their own economic development, they usually have
either input or market-expansion needs. Excluding an unprecedented rapid evolution in
technology, adding more capital and labour without the adequate materials will add to
production rates, but at increasingly slower rates of growth. Therefore, and factoring in the
uneven geographical distribution of raw materials, it is apparently the fact that (either by
necessity or willingness) great powers do need to trade a lot, and not just with each other.
(Morelli and Sonno 2017)

Great powers posses the knowledge that they can inadvertently hurt their access to raw
materials, investments, and markets if they cause less dependent states to impose economic
restrictions and carve out spheres for themselves. When all actors are in possession of such
awareness, all sides will want to avoid sparking a trade-security dilemma that might lead to
crisis and war. Moreover, both will have an incentive to project a character of reasonableness
and moderation in order to solidify positive expectations in the adversary: for the dependent
state, an expectation that the other is committed to the long-term economic openness; for the
less dependent state, an expectation that the other will restrain the desire to act like an
offensive-realist state—that is, to use its military power to enhance its control of its economic
future. (Copeland 2015, 428-446)

There also exists scholarship that challenges the realist account of the First World War; the
most often cited case of the failure of interdependence to maintain peace. It asserts that the
“Great War” actually began in the Balkans, where trade was local and vestigial and where
disputes regularly flared into open warfare. Fighting then spread to states where trade had
played an important role in managing previous conflict, but where commitments to the
warring factions took precedence. (Gartzke and Lupu 2012)
Works Cited
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