Economists for Peace and Security

The Economics of Peace and Security Journal

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How trade affects international interactions
Solomon W. Polachek

Vol 2, No 2 - Symposia: Water, Trade, Insurgency, July 2007

'How trade affects international interactions.' A viable peace is one that comes about naturally and persists without the need for outside intervention. At least since Baron de Montesquieu's statement that "peace is the natural effect of trade. Two nations who traffic with each other become reciprocally dependent: for if one has the interest in buying, the other has the interest in selling and thus their union is founded on the mutual necessities" (1748) a number of economists and political scientists maintained that trade among nations leads to peace. That logic is as follows: if a target country that is the recipient of conflict retaliates by cutting its trade ties with the conflict instigator, then a portion of the costs of conflict born by the instigator results from its lost gains from trade. Conflict is more costly the higher these gains from trade losses. This article summarizes some of the empirical work testing this proposition.

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