Trading Power? A Theoretical Explanation for the Interplay between Cooperation and International Trade with Empirical Evidence

Abstract

Oneal and Russett (1997, 1999); Maoz (2009); Hegre et al. (2010) states that the more bilateral trade, the more prone to cooperate countries will be. This paper challenges this premise, showing that this result is also dependent on the trade-off between politics and trade, from the countries’ point of view. It demonstrates that the higher benefits from trade, the more countries accept to empower rivals in the international system. As a result, we show increase the gains from trade lowers the incentives to align with a country that has diverse political interest. Moreover, as the salience of political issues vary, we witness heterogeneity in the effects of trade on the policy positions. This paper contributes by challenge, theoretically and empirically, one of the most solid literature strands in International Political Economy, the theory of liberal peace.