Globalization and wartime trade

Abstract

This article argues that on balance globalization does not increase, and may even reduce, the opportunity cost of Militarized Interstate Disputes (MIDs), as measured by foregone merchandise trade. Specifically, globalization makes it easier for states to substitute trade partners, makes it difficult to employ trade sanctions, makes credit more available to states at conflict, and encourages trade-substituting horizontal Foreign Direct Investment (FDI) and sanctions-resilient vertical FDI. Hypotheses are supported using High Dimensional Fixed Effects regression, applied to a Gravity model, with two-way clustering of standard errors, and an analysis of the effect of globalization on the marginal effect of MIDs on international trade. This suggests that while wars are becoming infrequent in recent decades, due to other factors, trade’s contribution to peace is diminishing.

Conflict and cooperation with trade partners

“…Research also has examined the deterrent effect of third-party intervention in disputes (Aydin 2008(Aydin , 2010Dorussen and Ward 2010;Feldman and Sadeh 2018;Kinne 2012;Kleinberg, Robinson, and French 2012;Maoz 2009) and the effect of third-party trade on costly signaling (Kinne 2014), as well as the manner in which competition for markets could provoke hostilities (Chatagnier and Kavakli 2017;Peterson 2015). Studies similarly consider how broader economic integration -what is often called globalization and typically incorporates financial relationships as well as trade -influences a state's conflict-propensity (Gartzke and Quan 2003;Sadeh and Feldman 2020;Schneider 2014;Schneider and Schulze 2003). 1 While this growing literature has greatly improved our understanding of how trade influences the incidence of armed conflict in a globalizing world, we contend that previous work is nonetheless limited in its ability to explain contemporary global events following from some common conceptual and operational choices.…”

Sanctions as a Catalyst for Russia’s and China’s Balance of Trade: Business Opportunity

“…There is also an unambiguous influence of the approach to sanctions, as described by Early and Preble (2020), who proved far greater intended effect in the case of fully enforced sanctions. Similarly, Feldman and Sadeh (2016) or Sadeh and Feldman (2020) pointed to the contradiction between the state official sanction policy and the interests of companies. Shin et al (2016) compared 133 sanctions from the perspective of macroeconomic indicators.…”

Naval Power and Effects of Third-Party Trade on Conflict

“…A number of recent studies demonstrated that the substitution process is not determined solely by the volume of third-party trade, but also by state's membership in trade agreements and institutions (Peterson 2015;Sadeh and Feldman 2020) and by strategic interests (Haim 2016;Feldman and Sadeh 2018;Gowa and Hicks 2017). Kleinberg, Robinson, and French (2012) argue that even states that are extensively involved in third-party trade will find it very difficult to divert trade if their extra-dyadic trade is distributed among few trade partners.…”