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The geography of conflicts and free trade agreements

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Author Info

  • Mathias Thoenig

    (Centre Universitaire d'Informatique)

  • Thierry Mayer

    (Département d'économie)

  • Philippe Martin

    (Département d'économie)

Abstract

We analyze the interaction of economic and political determinants of free trade agreements (FTA). In addition to standard trade gains, FTAs can promote peaceful relations by offering a political forum and by increasing the opportunity cost of conflicts that disrupt trade. If policy makers believe in such pacifying effects of FTAs, country-pairs with large trade gains from FTAs and high probability of conflict are more likely to sign a FTA. Using data on the 1950-2000 period, we show that this complementarity between economic and political gains is at work in the geography of FTAs. Country pairs characterized by a high frequency of old wars - which we use as a proxy of the probability of conflict - are shown to be more likely to sign FTAs, the more so the higher the trade gains from a FTA. These trade gains are estimated by a theory-driven empirical strategy to disentangle them from the political factors. We also show that, contrary to old wars, recent wars make it more difficult to negotiate a FTA. This suggests the existence of windows of opportunity to lock-in FTAs and peace. Finally multilateral trade openness, because it reduces the opportunity cost of a bilateral conflict, increases the political incentive to sign FTAs.

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Bibliographic Info

Paper provided by Sciences Po in its series Sciences Po publications with number 7740.

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Date of creation: Mar 2010
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Handle: RePEc:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8m2hh491

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Keywords: free trading arrangements; trade and war;

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References

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  1. Estevadeordal, Antoni & Freund, Caroline & Ornelas, Emanuel, 2008. "Does regionalism affect trade liberalization toward non-members ?," Policy Research Working Paper Series 4751, The World Bank.
  2. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
  3. Céline CARRERE, 2003. "Revisiting the Effects of Regional Trading Agreements on trade flows with Proper Specification of the Gravity Model," Working Papers 200310, CERDI.
  4. Richard Baldwin & Dany Jaimovich, 2010. "Are Free Trade Agreements Contagious?," NBER Working Papers 16084, National Bureau of Economic Research, Inc.
  5. Michaels, Guy & Zhi, Xiaojia, 2007. "Freedom Fries," CEPR Discussion Papers 6380, C.E.P.R. Discussion Papers.
  6. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," Working Paper 2005-03, Federal Reserve Bank of Atlanta.
  7. Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2005. "Make Trade not War?," CEPR Discussion Papers 5218, C.E.P.R. Discussion Papers.
  8. Enrico Spolaore & Romain Wacziarg, 2009. "War and Relatedness," CESifo Working Paper Series 2696, CESifo Group Munich.
  9. Marco Fugazza & Frédéric Robert-Nicoud, 2010. "The 'emulator effect' of the Uruguay round on US regionalism," LSE Research Online Documents on Economics 28723, London School of Economics and Political Science, LSE Library.
  10. Vincent Vicard, 2008. "Trade, conflicts and political integration : explaining the heterogeneity of regional trade agreements," Documents de travail du Centre d'Economie de la Sorbonne bla08022, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  11. Mansfield, Edward D. & Pevehouse, Jon C., 2000. "Trade Blocs, Trade Flows, and International Conflict," International Organization, Cambridge University Press, vol. 54(04), pages 775-808, September.
  12. Collier, Paul & Hoeffler, Anke & Soderbom, Mans, 2001. "On the duration of civil war," Policy Research Working Paper Series 2681, The World Bank.
  13. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
  14. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
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Cited by:
  1. Baldwin, Richard & Jaimovich, Dany, 2012. "Are Free Trade Agreements contagious?," Journal of International Economics, Elsevier, vol. 88(1), pages 1-16.
  2. Marco Fugazza & Frédéric Robert-Nicoud, 2010. "The 'Emulator Effect' of the Uruguay Round on US Regionalism," CEP Discussion Papers dp0973, Centre for Economic Performance, LSE.
  3. Lan, Xiaohuan & Li, Ben, 2011. "Nationalism and international trade: theory and evidence," MPRA Paper 36412, University Library of Munich, Germany, revised 03 Feb 2012.
  4. repec:hal:cesptp:halshs-00270618 is not listed on IDEAS
  5. Vincent Vicard, 2008. "Trade, conflicts and political integration : explaining the heterogeneity of regional trade agreements," Documents de travail du Centre d'Economie de la Sorbonne bla08022, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  6. Florian Mölders, 2012. "On the Path to Trade Liberalization: Political Regimes in International Trade Negotiations," Discussion Papers of DIW Berlin 1245, DIW Berlin, German Institute for Economic Research.

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