Economic Interdependence and Third-Party International Interactions: A 30-Country Third-Party Bloc Case Study

Abstract

AbstractThe trade–conflict model claims that one state,designated ‘actor’, is deterred from initiating conflict against a trading partner,designated ‘target’, for fear of losing the welfare gains associated with trade. This paper extends the trade–conflict model to garner implications concerning trade and conflict interactions where third-party blocs are involved. The theoretical propositions supported by proofs are: (1) if the actor increases trade with a third-party who is a friend of the target, then the actor will decrease conflict toward the target; (2) if the actor increases trade with a third-party who is a rival of the target, then the actor will increase conflict toward the target. A 30-country sample from the Conflict and Peace Data Bank (COPDAB) is used and divided into three blocs, namely a Western bloc, a Middle Eastern bloc, and an Eastern bloc. The empirical analysis supports the hypotheses. A similar relationship is also discussed and tested for situations in which conflict increases or decreases between the actor and third-party bloc. In addition, the evidence shows that Western bloc countries play a central role in world political and economic relationships.