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Beyond Ricardo: The Link between Intra-Industry Trade and Peace

Published online by Cambridge University Press:  03 May 2012

Timothy M. Peterson  and
Cameron G. Thies
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Abstract

In this article, it is argued that horizontal intra-industry trade is associated with reduced conflict propensity within dyads. Horizontal intra-industry trade is characterized by participation in international markets for similar – in many cases, branded – commodities, resulting from economies of scale and consumer tastes for variety. Conversely, inter-industry trade in accordance with the Ricardian and Heckscher–Ohlin models, while providing valuable trade gains, in some instances provokes vulnerability to trade partners, such that its overall impact on dyadic conflict is ambiguous. Support for this expectation is found in empirical tests spanning from 1963 to 2001. Additionally, there is evidence that development is insufficient to preclude conflict when jointly developed dyads engage in no intra-industry trade.

Type
Articles
Information
British Journal of Political Science , Volume 42 , Issue 4 , October 2012 , pp. 747 - 767
Copyright
Copyright © Cambridge University Press 2012

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Footnotes

*

Department of Political Science, Oklahoma State University (email: timothy.peterson@okstate.edu); and Department of Political Science, University of Iowa, respectively. The authors wish to thank the Editor and three anonymous reviewers for very helpful comments. An Appendix is available at http://dx.doi.org/10.1017/S0007123412000129. Replication data and a supplemental appendix are available at https://sites.google.com/site/timothympetersonosu/.

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35 Again, non-branded intra-industry trade (e.g., bilateral trade of steel, which occurs between the United States and several European Union states) does not bestow this additional pacifying influence; however, the mere lack of vulnerability associated with non-branded intra-industry trade suggests that the opportunity cost effect results in a pacifying influence (see Polachek, ‘Conflict and Trade’) because the absence of strategic vulnerability suggests an absence of tension. However, because the added benefit of consumer demand for variety – and mutual brand recognition – is absent, non-branded intra-industry trade should be somewhat less pacifying than the branded variant.

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46 Ultimately, we think that the occasionally coercive aspects of vulnerability introduce variation into an otherwise pacifying impact of trade gains. As mentioned above, future research can benefit from examining conditions in which specialization leads to coercion.

47 Given that these hypotheses suggest the lack of a relationship between two variables, we construe non-significance in statistical tests of these variables as support for the hypotheses. However, this support should be interpreted modestly, given that it is much easier not to find statistical evidence of a relationship than it is to find statistically significant support for a relationship.

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57 Importantly, this measure captures the proportion of dyadic trade that is intra-industry, not the flow of intra-industry trade or the proportion of either state's economy that depends on intra-industry trade. We address this issue below.

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65 As such, its SITC 5-digit code is simply 78120.

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79 Specifically, the probability decreases from 0.0003 to 0.0002. All reported probability changes are significant at the 0.05 level. Percentage changes in probability are calculated as: (new probability − old probability)/old probability × 100. All substantive probabilities are very small, due to the fact that the median case involves dyad members over 4,000 miles apart, and with 16 years of peace. The baseline probability of fatal MID onset with all variables held at their medians is 0.0003.

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82 We calculate marginal effects of interactions using the margins command in Stata.

83 A detailed examination of interaction effects supports this conclusion. Figures of these marginal effects are available by request from the authors.

84 The inclusion of the interaction between the lower development and lower dependence in Model 6 complicates the interpretation somewhat, given that when trade dependence equals zero, intra-industry trade must also equal zero. Results are also robust when including a three-way interaction between development, trade and intra-industry trade; however, we do not present these models due to the difficulty in interpretation. These models are available by request from the authors.

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