Microchips and sneakers: Bilateral trade, shifting power, and interstate conflict
| Published date | 01 July 2024 |
| DOI | http://doi.org/10.1177/00223433231153902 |
| Author | Yuleng Zeng |
| Date | 01 July 2024 |
https://doi.org/10.1177/00223433231153902
Journal of Peace Research
2024, Vol. 61(4) 659 –672
© The Author(s) 2023
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DOI: 10.1177/00223433231153902
journals.sagepub.com/home/jpr
1225162JPR0010.1177/00223433231153902Journal of Peace ResearchZeng
research-article2023
Regular Article
Microchips and sneakers: Bilateral trade,
shifting power, and interstate conflict
Yuleng Zeng
Department of Political Science, University of Salzburg
Abstract
Strong commercial ties promote peace as states shun the opportunity costs of economic disruption. However, trade
also enriches and empowers states, rendering them more capable of enforcing long-term settlements. Given economic
disruption does not last forever, countries can be incentivized to trade short-term economic losses for long-term
political or territorial gains. This trade-off can restrict or even reverse the pacifying effect of commerce as it renders
states incapable of committing to existing peaceful deals. I argue the scope condition hinges on the existing power
imbalance and the security externalities of trade, defined as states’ abilities to translate trade gains into (potential)
military power. For countries where the existing power gap is not extreme, the impact of bilateral strategic trade is
contingent upon a country’s trade externality relative to its opponent’s. Although increased bilateral trade can be
peace-promoting when the relative externality is small, the pacifying effects can dissipate as a relatively weaker state
becomes more capable of exploiting trade gains. Building on recent work in network analysis, I propose a new
measurement of trade externalities to test the above theory and find supporting results.
Keywords
economic interdependence, network analysis, strategic goods, trade externality
Strong commercial ties can help promote peace as they
bind nations in a mutually dependent relationship. As
such, states are less likely to fight and risk the opportu-
nity costs of economic disruption (Gartzke, Li & Boeh-
mer, 2001; Polachek & Xiang, 2010). But history is also
replete with cases where increasing bilateral trade can
stoke (as well as reduce) conflict,
1
the relationship
between the USA and China being a prominent recent
example. Commercial interests and the related restrain-
ing effects were clearly behind the US policy toward
China in the 1990s. Yet in recent years we witness more
tensions simmering on both sides. Many pundits and
strategists lament trade can no longer anchor the rela-
tionship between the United States and China and fear
that the level of threats of limited military conflict
between them has become worryingly high (Economist,
2019; Bo, 2020). If trade promotes peace by increasing
opportunity costs, then the profits of peace and potential
economic losses of conflict are clearly much higher
nowadays. The two countries’ trade volume in 1990 was
3.6 times larger than in 1980. By contrast, their bilateral
trade has expanded over 100-fold from 1980 to 2010.
2
With such a dramatic increase in bilateral trade, if the
rationale of peace via trade holds we should generally
expect a lower likelihood of costly conflict (i.e. conflict
involving the use of force).
It is puzzling why the earlier relatively small increase
in bilateral trade restrained, while the later massive
Corresponding author:
zengyuleng@gmail.com
1
I focus on bilateral trade to investigate the theoretical foundation.
See also footnote 25. See below on how this focus differs from
previous concepts such as trade openness or trade dependence.
2
Based on the Direction of Trade Statistics (DOTS) by the IMF
(https://data.imf.org/?sk¼9D6028D4-F14A-464C-A2F2-
59B2CD424B85, accessed 11 December 2021). The average annual
growth rate in the 1980s was 17%, while the growth rate since 1990
is around 25.4%.
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