Third-party trade, political similarity, and dyadic conflict
| Author | Timothy M Peterson |
| Date | 01 March 2011 |
| DOI | 10.1177/0022343310396266 |
| Published date | 01 March 2011 |
Third-party trade, political similarity,
and dyadic conflict
Timothy M Peterson
Department of Political Science, Oklahoma State University
Abstract
A growing literature maintains that trade is pacifying to interstate relations, and recent work on trade networks
suggests that this pacifying effect extends to indirect trade ties. In this article, it is argued that third-party trade can
also have an aggravating effect within dyads, by threatening to alter the dyadic balance of capabilities. For the state
trading outside the dyad, trade gains from third parties provide incentives to demand change in the dyadic status quo
and finance violent conflict when dyadic disputes arise. For the state whose dyadic partner trades with third parties,
potential for the trading state to grow increasingly more powerful encourages action to prevent erosion of the non-
trading state’s relative power. These aggravating effects are conditional, however, on dyadic political similarity, as
concerns for relative capability shifts decrease when states do not view their dyadic partners as threats. Hypotheses
derived from this argument are tested on data spanning 1885 to 2000. Results support these hypotheses, suggesting
important implications for the literature on trade and conflict. When extending the relative gains arguments
associated with realism beyond the dyad, a clear, yet conditional, aggravating effect of third-party trade emerges.
Keywords
mercantilism, military conflict, realism, relative capabilities, third-party trade
The question of how trade affects conflict is one of the
most examined and debated within the study of interna-
tional relations. Yet, despite a large and growing literature
investigating this question, few studies look beyond the
states or dyads engaged in trade to the relationship
between states that trade and those left out of given trade
ties. This relative paucity of research exists despite innu-
merable historical examples in which third-party trade
served both to facilitate aggression, by financing military
campaigns, and to encourage pre-emption, by sparking
fear and distrust among economic competitors. The mer-
cantilist era exemplified these patterns, as commercial riv-
alries dragged European powers into over two centuries of
nearly continuous military conflict.
However, after the works of David Hume (1752) and
Adam Smith (1776) revealed fundamental flaws in mer-
cantilist logic, capitalist ideology proliferated throughout
the developed world. Free from the assumption that a
favorable trade balance cultivated state power, trade
became viewed increasingly as a pacifying force, tying
state interests together rather than pulling them apart.
The current literature, far removed from the age of
mercantilism, empire, and major power war, suggests
that, if states can overcome barriers to cooperation, the
resulting economic ties inhibit violence (e.g. Polachek,
1980; Oneal & Russett, 1997; Gartzke, 2007). During
the mercantilist era, however, the causal mechanisms
connecting trade to conflict stemmed not only from fail-
ures to cooperate, but also from competition for trade
with third parties. As Gilpin (2001) points out, the mer-
cantilist spirit is far from dead, as modern states attempt
to shape their exposure to international trade in ways
that secure their own advantage. If states in the contem-
porary period are competitive over trade policy, then
third-party trade may retain an aggravating influence.
In an isolated dyad, absolute gains and potential rela-
tive losses from dyadic trade may have cross-cutting
effects on the stability of peace. However, in a
Corresponding author:
timothy.peterson@okstate.edu
Journal of Peace Research
48(2) 185–200
ªThe Author(s) 2011
Reprints and permission:
sagepub.co.uk/journalsPermissions.nav
DOI: 10.1177/0022343310396266
jpr.sagepub.com
p
eace
R
ESEARCH
journal of
multilateral environment, states left out of trade
relationshipslose unambiguously relative to trading states.
Accordingly, I argue that trade between a dyad member
and thirdparties aggravates dyadicrelationships,ce teris par-
ibus. This follows because the trading state, growing
increasingly more powerful relative to the state that is left
out, facesincentives to demand concessions from its dyadic
partner, while its trade provides financing forviolent chal-
lenges in pursuit of this aim. Conversely, the state not
involved in third-party trade may resort to violence to pre-
clude erosion of its relative power over time. However,
political similarity within the dyad conditions this effect
because similarstates are less sensitiveto changes in relative
capabilities. As such, within politically similar dyads, the
aggravating effect of third-party trade is reduced.
This article contributes to the literature on trade
and conflict by demonstrating that the consequences
of trade transcend the states actually trading. Whereas
the extant literature generally examines the impact of
trade with respect to states that trade with each other,
I illustrate that trade ties affect incentives for conflict
throughout the system because states may lose, in rela-
tive terms, from trade relationships to which they are
not a part. This study complements the emerging liter-
ature on trade networks, which shows that indirect
trade ties pacify dyadic relationships (Maoz, 2009;
Dorussen & Ward, 2010); I focus on the counterfac-
tual, demonstrating the potentially aggravating effect
of third-party trade relationships when looking beyond
those indirect ties that connect dyads. My argument
also speaks to Gartzke’s (1998, 2007) notion of the
capitalist peace and to the importance of preference
similarity. I contend that, among states with conflicting
strategic interests, third-party trade, by threatening the
stability of the dyadic power balance, encourages mili-
tarized disputes, whereas for dyads with common state
preferences, suggesting a low underlying willingness to
engage in conflict, the potentially aggravating impact of
third-party trade diminishes.
I proceed as follows. First, I discuss the evolution of
empirical studies of trade and conflict to account for a
multilateral environment, focusing on the causal
mechanisms linking multilateral trade to peace and war
and highlighting the lack of attention paid to relative
capabilities with regard to this relationship. Next, I out-
line causal mechanisms asserting a conditionally aggra-
vating effect of third-party trade. Then, I present my
research design and test four hypotheses with rare events
logistic regression, using data spanning 1885 to 2001. I
conclude by considering the implications of my findings
to the literature on trade and conflict.
Trade and conflict: From dyads to a
multilateral environment
The liberal view that trade is pacifying is increasingly
prominent in the trade–conflict literature.
1
Although the
liberal banner encompasses several arguments linking
trade to reduced conflict, two theoretical perspectives
dominate the literature. The first suggests that interde-
pendence reduces conflict by altering the cost/benefit
calculus of conflict in favor of peace (Polachek, 1980;
Oneal et al., 1996; Oneal & Russett, 1997, 2001;
Russett & Oneal, 2001). Gaining favor more recently,
the second liberal strand argues that trade brings peace
by increasing information flows, reducing information
asymmetries that may lead to conflict (Morrow, 1999;
Gartzke, Li & Boehmer, 2001; see also Fearon, 1995).
Extant literature suggests several conditions under
which trade is pacifying in a multilateral environment.
Maoz (2009) and Dorussen & Ward (2010) examine
trade networks, demonstrating that indirect trade ties
have a pacifying effect on dyadic relationships. Dorussen
& Ward (2010) maintain that this effect follows from
the embeddedness of states in trade networks; increased
interaction in global communities facilitates informa-
tional and cultural exchange, decreasing the likelihood
that conflicts of interest arise and spark violent conflict.
This view complements Gartzke’s (1998, 2007) argu-
ment that common state preferences reduce incentives
for militarized conflict. Additionally, third-party trade
may be pacifying due to its deterrent effect (Huth &
Russett, 1984). Deterrence through trade follows from
the ‘friend of a friend’ phenomenon, wherein states join
conflicts on the side of their trade partners when their
trade gains are threatened (Polachek, Robst & Chang,
1999; Polachek, 2003; Aydin, 2008). Aware of this fact,
potential aggressors may be less likely to challenge states
with extensive trade ties.
The liberal argument does not go unchallenged, how-
ever. Literature generally associated with realism claims
that either trade is aggravating through its destabilizing
effect on relative power, or that the supposedly pacifying
effect of trade is completely epiphenomenal to state
interests and preferences (Waltz, 1979; Gowa, 1994;
1
However, there is also increasing acknowledgement that trade is not
pacifying everywhere and at all times. Recent literature has shown
that dyadic peace through trade may be conditional on, for
example, joint development (Hegre, 2000), the absence of trade
barriers (McDonald, 2004), the specific commodities being traded
(Dorussen, 2006), and the expectation that trade continues into
the foreseeable future (Copeland, 1996).
186 journal of PEACE RESEARCH 48(2)
To continue reading
Request your trial