Chapter 8 Commercial peace (Week 10)

8.1 Discussion questions

  • Chen (2020): What is the main argument? Is it convincing or not? Why?

  • Monteiro & Debs (2020): What is the main argument? Is it convincing or not? Why?

  • Do leaders provoke conflicts abroad to deflect attentions on domestic problems? (*)

President Joe Biden: U.S. would defend Taiwan militarily against China

8.2 A theory of commercial peace

Chen (2020) aims at moving the research focus beyond a dyadic focus. He argues (1) bilateral trade is often of low importance and easily substitutable and (2) all extradyadic trade is not equal. As such, Chen proffer a revised theory of commercial liberalism. Specifically, alliance can add to the opportunity costs generated by trade.

  • Allies may intervene military and cut off trade with the challenger.
  • Even when allies do not intervene, they can punish the challenger economically.
  • Allies also limit the alternative markets of the challenger.

8.3 An economic theory of war

Monteiro & Debs (2020) study the economic reasons of war. In doing so, they speak to two lines of literature: (1) the commercial peace literature (plus capitalist peace and trade expectation theory) and (2) power transition theory. For the former, the gist of the idea is that peace can also be inefficiency and costly for weaker states which have to accept existing international economic order. See also Andrew Coe’s manuscript The Modern Economic Peace. For the latter line of literature, their study provide an important explanation concerning why weaker states choose to initiate conflict. Specifically, weaker states’ relative military weakness exacerbate the existing economic commitment problems (i.e. powerful states cannot credibly commit not to exploit their economic relationship), thereby making the peace deal less efficiency and attractive. In this case, fighting provides an opportunity for them to obtain a better prospect of economic growth.