Asymmetric Trade Dependence and Interstate Conflict Initiation Embedded in Networks

This paper examines the effect of asymmetric trade dependence on militarized interstate conflicts in the network context. An extensive literature on trade and conflict finds that asymmetry in trade relations does not affect the probability of conflicts onset. Based on the existing model taking account of the effects of the third parties and by developing the variables indicating the trade asymmetric relationship in terms of the importance of export, import, and balance to one state’s GDP, this paper furthers the research by taking account of the inner-dyadic trade symmetric relationship while controlling for the extradyadic structure and/or the endogeneous network effects and within-dyadic deepness of the trade relations. This paper shows that, when taking extradyadic trade concentration into account - the extent to which a state trades with partners beyond the dyad - and controlling for the within-dyad deepness of the trade relations, trade asymmetry moderates the pacifying effects of trade on conflict. This holds for a range of different types of trade asymmetries, related to the importance of dyadic trade, import, and overall trade balance to the state’s economy, and different approaches, related to the dyadic level and the global network perspective. When following the dyadic data analysis approach, an increase in the dyadic trade asymmetry, the balance asymmetry, or the import asymmetry is associated with a global increase in the likelihood of onset of militarized interstate disputes at general level; and the balance asymmetry and the import asymmetry are significantly and positively correlated to on the onset of fatal militarized interstate disputes. When looking at the onset of militarized interstate disputes as a whole network graph and controlling for the endogeneous network effects, an increase in trade asymmetry in all kinds of forms is associated with a global increase in the likelihood of onset of militarized interstate disputes.