Peace and Free Trade

In The Spirit of the Laws, Montesquieu famously argued that:

…Peace is the natural effect of trade. Two nations who traffic with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.

Similar arguments were made by Kant, Cobden, Angell, and others. The effect of free trade on war was perhaps most pithily summarized by the aphorism “when goods don’t cross borders, soldiers will.”  In Territory flows and trade flows between 1870 and 2008 Hu, Li and Zhang offer supporting evidence:

Countries gain and lose territories over time, generating territory flows that represent the transfer of territorial sovereignty. Countries also export and import goods, creating trade flows that represent the transfer of merchandise ownership. We find a substitution between these two international flows during the years 1870 and 2008; that is, country pairs with greater trade flows have smaller territory flows. This indicates how international trade enhances international security: reciprocal goods transactions discourage irreciprocal territorial exchanges.

Not all territorial exchange involves war but most do.

See also Polachek and Seigle in the Handbook of Defense Economics who find that “A doubling of trade leads to a 20% diminution of belligerence.”