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IPFS News Link • Free Trade

How Free Trade Increases Peaceful Interaction Between Nations

• the Daily Bell

The Relationship Between Trade and Peace

recent study by Jong-Wha Lee and Ju Hyun Pyun has found a strong correlation between trade and peace. Examining a "large panel data set of 243,225 country pair observations" over 50 years "confirms that an increase in bilateral trade interdependence significantly promotes peace." But that is not all they found. Additionally, and most importantly, they found that "global trade openness significantly promotes peace." This latter effect is felt more so by countries far apart than those that share borders.

This is significant empirical support for those who have held that trade promotes peace along with prosperity. Whether Bastiat said it or not, plenty have contemplated the pacifying nature of trade, of the altered incentives when the ability to access markets is available.

Whatever threat China poses to the United States, it doesn't appear to improve by making trade more difficult.

Political economist and sociologist Max Weber wrote that a capitalist economy is "one which rests on the expectation of profit by the utilization of opportunities for exchange, that is on (formally)peaceful chances of profit." He contrasted this with "acquisition by force," a transaction he described as "not expedient." Not when compared to the peaceful exchange, at least.

Making the cost to "truck, barter, and exchange" high increases the relative appeal of taking goods by force or occupation. Unfortunately, our most recent policy rhetoric and efforts have focused on an increase in tariffs and lowered trade that may result in increased tension with other nations, particularly China. Preventing goods from flowing between nations serves only a protectionist instinct. These are goods with pacifying externalities attached that we have rejected.

Whatever threat China poses to the United States, it doesn't appear to improve by making trade more difficult.

Sweet Commerce

This is another tally on the board for the doux commerce thesis. Translated as sweet commerce, the thesis suggests that commerce has a softening effect, trading violence for exchange. Most trace the origin of the thesis to Montesquieu, who wrote in his work The Spirit of the Laws:

Commerce cures destructive prejudices, and it is an almost general rule that everywhere there are gentle mores, there is commerce and that everywhere there is commerce, there are gentle mores."

Therefore, one should not be surprised if our mores are less fierce than they were formerly. Commerce has spread knowledge of the mores of all nations everywhere; they have been compared to each other, and good things have resulted from this.

This thesis has been defended by classical and modern economists alike, from Adam Smith to Deirdre McCloskey. The peaceable interaction, the tempering influence, the gentle mores, have been considered part of the societal gains from commerce, both domestically and internationally, and now another study has indicated this is so. Commerce bonds distant and alien individuals. It places them on equal footing; not equality as some measure, but there is an inherent equality to market participation that creates a forum of participation for individuals. Denying access to markets has an alienating and stratifying effect within communities. It is no surprise this alienation duplicates across borders when markets are constrained.