Edited by Christopher J. Coyne and Rachel L. Mathers
Han Dorussen and Hugh Ward 25.1 INTRODUCTION The proposition that trade promotes peace is one of the cornerstones of liberal thought. Commerce makes stable interstate relations more valuable, because producers derive benefits from exports and consumers from imports. It is also a source of revenue and possibly even more important political support for governments (Schumpeter 1951; Polachek 1980, 2002; Russett and Oneal 2001). Classical Liberals, like Codben and Mill, further emphasized that trade necessitates transnational communication. Traders can become valuable mediators with a clear interest in avoiding any escalation of conflict that may threaten their livelihood (Dorussen and Ward 2010). Proponents of the so-called Capitalist Peace argue that trade – among other valuable interstate connections such as investments – allows states to avoid conflict because it reduces the uncertainty in interstate relations and hence makes it more likely that states are able to resolve their conflict without having to resort to the use of force (Gartzke 2007).1 The significance of trade is challenged regularly on both theoretical and empirical grounds. A pertinent question is whether the effect of trade on conflict is uniform across commodities or heterogeneous; in other words, does it matter what goods are being traded? The liberal view is that trade always reduces the likelihood of conflict, even though trade in some goods may be particularly pacifying (Dorussen 2006). In contrast, critics emphasize that the security implications of trade in, for example, strategic or high-tech goods, are bound to shape trade policies, and that such trade is associated...
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