International Trade And Conflict: A Dyadic Study Of Trade’s Effect On Violent And Non-Violent Conflict

Abstract

Does international trade increase or decrease conflict between nations? Liberal theory suggests that increased trade reduces conflict as states become more interdependent and develop a higher opportunity cost of instigating conflict. While others argue that increased interactions facilitated by growing trade relations and power asymmetry between nations actually augment the opportunities for conflict. Previous research has focused either on dyadic trade’s effects on violent forms of conflict, without the implications on non-violent measures of conflict, or vice versa. This paper looks for a more comprehensive analysis of increased trade’s influence on all forms of conflict between two nations, China and Japan. The liberal argument was tested on three separate measures of conflict; militarized interstate disputes, United Nations voting behaviors, and World Trade Organization disputes. This study provides some evidence that increased trade does lead to an increased incidence of conflict, for both violent and non-violent conflict between China and Japan. Little evidence also suggests that the realist argument regarding power relations, in the form of GDP asymmetry, is influential in reducing conflict between the two countries.