trade and war

Question 1

• Richard Cobden and John Stuart Mill argued that free trade brings ( liberal trade theory)

Answer 1

free trade brings harmony of interests because it separates the pursuit of wealth from territory, thereby making it unnecessary to conquer foreign sources of raw materials or finished goods.

Question 2

o Trade is cheaper because

Answer 2

it is cheaper than war or the occupation of an unwilling society.

Question 3

o This form of comparative advantage made all participating states better off because it pushed product prices down.

Answer 3

• As well, trade permitted states to specialize in a trade of those goods they were best at producing, and receiving in turn inexpensive products from other states with similar specialization.

Question 4

• Trade reduces the likelihood of war by structurally altering the societies that engage in trade.

Answer 4

o Trade creates a middle class that resists involvement in war more strongly than other domestic socio-economic distributions.
o Capitalism and free trade increase individual liberty and help promote democracy, which in turn promote the rule of law and international cooperation further facilitating international trade.

Question 5

new economic institutions consisted of the

Answer 5

World Bank, the International Monetary Fund, and today the World Trade Organization.

Question 6

Criticism of liberal trade theory

Answer 6

• (1): Politics structures trade: Western goal of keeping the Middle Eastern oil states from unifying is an implicit goal: designed to keep the price of oil low and to disable attempts at a successful cartel.
• (2): Soviet occupation of Eastern Europe indicates that outright military occupation of foreign lands is not necessarily more expensive than trade. This is especially true of industrial societies where occupation and control through a totalitarian police state makes resistance nearly impossible.

Question 7

Using the COW datatset, Barbieri established some important exceptions to the link between trade and war:

Answer 7

• (1). Extremes in symmetric and asymmetric interdependence lead to increased disputes.
• (2). Medium symmetric interdependence leads to peace.

Question 7

• While trade reduces conflict, it does not increase

Answer 7

cooperation

Question 8

mercantilism

Answer 8

which is the strategic use of trade to obtain greater relative gains.
o Its principal implication is that free trade is not free trade:
 Rather, it is a method of obtaining monopolization and thereafter affecting the structure of trade so that the state obtains favourable terms of exchange.
 Mercantilists are preoccupied with accumulating the resources necessary for war.

Question 9

strategic commodities necessary for the survival of the state are likely to produce a

Answer 9

different behavior than non-critical resources.

Question 10

o Dependence should be classified more clearly been sensitivity and vulnerability:

Answer 10

 Sensitive: suffer costs but can compensate.
 Vulnerable: suffer costs but cannot compensate

Question 11

Copeland’s Theory of Trade Expectations in Interdependence and War:

Answer 11

• Copeland argues that high interdependency can be either peace-inducing or war-inducing depending on the expectations of future trade.
• Interdependence fosters peace, as the liberals argue, but only when trade levels are expected to be high in the foreseeable future.
  o Low-expectations of future benefits from a highly interdependent relation leads to war because the most highly dependent states may come to believe that the use of military force will provide an easier means of obtaining the economic wealth to support their long-term security.
• There are instances in which non-trade is more likely to keep the peace by reducing the insecurities associated with interdependence. This can be argued to be the case between India and Pakistan.

Question 12

Conventional Wisdom Arguments, ranked by evidence:

Answer 12

(1). Defensive Realists: states stop trading if it gives power to another state (some evidence).
(2). Liberalism: states will remain peace based on current trade benefits (little evidence).
(3). Off Realists: wrongly predicts states never trade due to relative gains (refuted).
_In fact, states do trade, and avoid the trade-security dilemma, by expensive domestic signaling through transparent legal systems. Trade-security dilemmas manifest as tariffs and large fleets to access natural resources like food, oil, minerals, fertilizer.
(4). Marxist: No evidence of politicians influenced by business lobbies (refuted).

Question 13

_Trade ends or is reduced under 6 exogenous circumstances:

Answer 13

(1). Third party events: two states compete over the behavior of a third state.
(2). Third party trade access: two states compete over trade access to a third state.
(3). Third party domestic event: a domestic event causes two states to collide.
(4). States stop trading to inflict a reduction in economic growth in another state.
(5). States reduce trade due to competition to secure control over a depleted or depleting resources, like oil.
(6). Trade is reduced due to a domestic political event that is entirely exogenous to the trading process, such as change of government.