Trade and peace: The WTO case

Abstract

Investigating the impact of international trade on global peace assumes paramount significance given the current state of global political and economic instability, which is characterized by growing volatility and increased uncertainty. This paper empirically examines the impact of international trade on peace in the world and among different countries from the perspective of the World Trade Organization (WTO). Using data on interstate conflicts from 1950 to 2000, we find robust evidence that the international trade framework, represented by the WTO, reduces the probability and intensity of militarized interstate disputes, thereby making a significant contribution to the establishment and maintenance of global peace. The magnitude of this impact, however, varies depending on the geographical distance between nations, the extent of tariff concessions made by countries, and the changes in the institutional framework of the World Trade Organization. First, the WTO has the greatest impact on neighboring countries and those in close proximity, where the probability of conflicts is higher. Second, the peace-promoting effect of the WTO is significantly higher for developed countries that make greater tariff concessions compared to developing countries. Finally, changes in the WTO's institutional framework following the Uruguayan negotiations have diminished its effect in promoting peace. These results suggest that in order to mitigate the current concerns about global security, all countries must insist on expanding openness, deepening common interests, and avoiding engaging in direct military conflicts that would result in significant welfare losses.