Trade and civil war

One of the most pressing problems for many of the poorest countries in the world is civil war. Increased integration in the world economy has often been advocated as a way of promoting peace and prosperity in these countries. However, little is known on the impact of trade openness on the risk of civil conflicts. Philippe Martin, Thierry Mayer and Mathias Thoenig have a summary of their recent work on the relationship between international trade and civil war available at VoxEU.org. Their research finds that trade deters severe conflicts but fosters less severe ones.

In their paper, "Civil wars and International Trade", forthcoming, Journal of the European Economic Association Papers and Proceedings, Martin, Mayer and Thoenig argue that there are two possible mechanisms relating international trade and civil wars: deterrence and insurance. Their basic argument is:

The first effect is such that trade openness lowers the risk of civil wars, the second works in the opposite direction. Our hypothesis is the following: because civil wars destroy international trade, some of the economic gains generated by trade are put at risk for all groups (rebels and government), so that the opportunity cost of conflict increases with observed trade flows and all involved actors should have more incentive to make concessions and avoid a violent escalation. From this point of view, greater openness to international trade should act as a deterrent to escalation towards civil conflicts. However, international trade also provides a substitute to internal trade as it provides alternative sources of income and consumption. From this point of view, it can act as insurance and can reduce the opportunity cost of civil war. Another way to state the second argument is that international trade can weaken economic ties and dependencies between groups and regions inside a country. This reduced internal dependency decreases the opportunity cost of conflicts. This line of reasoning echoes the one made in our previous paper [This reference is to their paper, "Make Trade not war?", forthcoming, Review of Economic Studies. See their VoxEU.org column of 4 July 2007.] showing that multilateral trade (contrary to bilateral trade) openness increases the probability of a bilateral conflict between countries.

The authors summary contains a discussion of their empirical results. Their conclusion,

... is that trade openness has contrasting effects on the probability of civil wars. It deters severe conflicts but fosters less severe ones. Our work should be interpreted as a word of caution on the expectations that several commentators have put on globalisation as a means of reducing internal violence in poor countries. However, our results do point to the positive effect that trade openness has in deterring the most violent conflicts. This is no small achievement.