In this chapter, we shift our attention to the interaction between military conflict and the other focus of our book – economic openness – which played a crucial part in Chapters 2 and 3. Economic openness is measured in various ways, but in this chapter we emphasize the trade dimension of economic openness, which connects the analytical framework of our book to an important debate in the related fields of international relations and international political economy: the trade and conflict controversy.
The idea that trade promotes peace dates from at least the late eighteenth century, and has two contemporary explanations: the liberal argument and the bargaining argument. The antithesis that trade generates conflict also has a long intellectual history, which is often explained from a neo-Marxist view or a neomercantilist derivative of realism. So far, scholars have mathematically demonstrated the logical consistency of the liberal and bargaining arguments. These formal models consider aggregated or total trade, ignoring variations of trade across economic sectors and flow directions (export and import). With a few exceptions, statistical studies have also used total bilateral trade. Most of these studies find that a rise in trade reduces the likelihood of conflict. It is a fair statement that most theoretical and empirical works on the effect of trade on conflict ignore both the composition of trade across economic sectors and the trade flow directions in terms of export and import.