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Trade and Conflicts: Do Preferential Trade Agreements Matter?

Listed author(s):
  • Rana Arslan Tariq

    ()

    (Laboratoire d’Economie d’Orléans (LEO) UMR 7322 – CNRS, Faculté de Droit, d’Economie et de Gestion Rue de Blois – BP 26739, 45067, Orléans Cedex 2, France)

A long debate continues whether international trade institutions (specifically preferential trade agreements [PTAs]) affect security relations between states. Contradicting theories and empirical claims are put forward by realists and liberals. The former posit that the institutions are epiphenomenal and possess no power to constrain state behavior whereas the latter claim that the institutions are likely to promote cooperation by supplying forums for consultation, arbitration and adjudication, thus reducing the risk of war between states. This study identifies an important channel through which the legal dimension of trade agreements (hence dispute settlement mechanisms [DSMs] in PTAs) may have pacifying effects on the outbreaks of war. DSMs of PTAs do have strong implications for militarized interstate disputes (MIDs), although not directly, but through low-level of foreign policy disputes, such as economic sanctions. If economic sanctions are believed to escalate to violent conflict, PTA DSMs may reduce the probability of war by mitigating the escalation of economic sanctions. However, the level of legalism differs among DSMs in PTAs. The present study first confirms empirically that sanction disputes escalate to militarized disputes and further, addresses the selection issue by using bivariate probit model. I find a sizeable impact of medium level of legalism reducing the sanctions escalation into war whereas high level of legalism, in which the state sovereignty is limited, do reduce the probability of sanctions but have no impact on war probability. Further, the interstate political cooperation proves to be a strong determinant for highly legalistic PTAs but not in the case of medium level of legalism.

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Article provided by De Gruyter in its journal Peace Economics, Peace Science, and Public Policy.

Volume (Year): 21 (2015)
Issue (Month): 4 (December)
Pages: 561-574

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Handle: RePEc:bpj:pepspp:v:21:y:2015:i:4:p:561-574:n:12
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  1. Faten Ghosn & Glenn Palmer & Stuart A. Bremer, 2004. "The MID3 Data Set, 1993—2001: Procedures, Coding Rules, and Description," Conflict Management and Peace Science, Peace Science Society (International), vol. 21(2), pages 133-154, April.
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  4. Smith, James McCall, 2000. "The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts," International Organization, Cambridge University Press, vol. 54(01), pages 137-180, December.
  5. Caruso Raul, 2003. "The Impact of International Economic Sanctions on Trade: An Empirical Analysis," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 9(2), pages 1-36, April.
  6. Gregory A. Raymond, 1994. "Democracies, Disputes, and Third-Party Intermediaries," Journal of Conflict Resolution, Peace Science Society (International), vol. 38(1), pages 24-42, March.
  7. Drezner, Daniel W., 2003. "The Hidden Hand of Economic Coercion," International Organization, Cambridge University Press, vol. 57(03), pages 643-659, June.
  8. Yoram Haftel, 2013. "Commerce and institutions: Trade, scope, and the design of regional economic organizations," The Review of International Organizations, Springer, vol. 8(3), pages 389-414, September.
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