Trading Communities, the Networked Structure of International Relations, and the Kantian Peace

The authors argue that theories regarding the relationship between trade and conflict could benefit greatly from accounting for the networked structure of international trade. Indirect trade relations reduce the probability of conflict by creating (1) opportunity costs of conflict beyond those reflected by direct trade ties and (2) negative externalities for the potential combatants’ trading partners, giving them an incentive to prevent the conflict. Trade flows create groups of states with relatively dense trade ties, which we call trading communities. Within these groups, the interruptions to trade caused by conflict create relatively large costs. As a result, joint members of trading communities are less likely to go to war; however little they directly trade with each other. The authors systematically measure and define trading communities across various levels of aggregation using the network analytic tool of modularity maximization. The authors find significant support for their hypothesis, indicating that interdependence theory can be extended to extra-dyadic relations.