Microchips and sneakers: Bilateral trade, shifting power, and interstate conflict

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 enforcing long-term settlements. Given disruption does not last forever, countries can be incentivized to short-term losses for political or territorial gains. This trade-off restrict even reverse pacifying effect commerce it renders incapable committing existing peaceful deals. I argue scope condition hinges on power imbalance security externalities trade, defined states’ abilities translate gains into (potential) military power. For where gap is extreme, impact bilateral strategic contingent upon a country’s externality relative its opponent’s. Although increased peace-promoting when small, effects dissipate relatively weaker state becomes exploiting Building recent work in network analysis, propose new measurement test above theory find supporting results.