Trade Imbalances and Interstate Conflict Onset Embedded in Networks

This article examines whether trade imbalances undermine the economic foundation of the world politics. From a positive perspective, trade deficits can be used as economic leverages to finance. This article probes into the question whether the negative effects of global trade imbalances finally spill into high politics. I argue that trade deficits can not only put states under pressure to adjust the balance, but also create dependence and increase the vulnerability of states. Frictions accumulate in the adjustment of dyadic imbalanced trade, creating the potential for future conflict among states. The coordination of the state preferences and domestic preferences contributes to more aggressive foreign policies. Using temporal exponential graph models to analyze the network of military interstate disputes across monadic, dyadic and network levels over the years during 1951-1999, strong support is found for those arguments. The results show that greater global trade deficits of a state, greater dyadic trade imbalances and greater trade imbalances with trade partners’ alliances are statistically significantly associated with a higher likelihood of onset of militarized interstate disputes among dyads.