Extended Dependence: Trade, Alliances, and Peace

Abstract

The commercial peace theory maintains that trade fosters peace because trade makes conflict more costly. However, focusing on dyadic trade or overall trade integration, previous studies provide an inaccurate picture of the material incentives that states face in the event of military conflict. Some, but not all, third parties create economic costs for combatants. In this article, I develop the idea of Extended Dependence. I argue that trade with a potential target's allies promotes peace because those states may reduce trade with the challenger following military interventions, punish it by imposing economic sanctions, or undermine its ability to access alternative markets. Empirical analyses that cover the period 1951-2010 strongly support my arguments. Trade dependence on the prospective target or on the target's nonaggression-pact partners, however, does not yield a similar effect. This article advances our understanding of how economic linkages and security institutions can work together to diminish interstate conflict.

Keywords: alliances, commercial peace, deterrence, interstate conflict, trade