Interstate Rivalry and Interstate Trade

Abstract

Are countries concerned about the impact on interstate commerce of security externalities? Trade often makes countries vulnerable to the vagaries of the international market and shifts the power relationship between partner countries. The volume of trade, however, has increased enormously over time. We examine how interstate rivalry affects interstate trade. An extensive literature examines the role of interstate security in shaping interstate commerce but pays little attention to that of rivalry. Similarly, the thriving rivalry literature has yet to explore the role of rivalry in non-security interstate relations such as trade. We aim to fill this gap. We argue that rivalry deters trade activities, and that this tendency is intensified amid deeper and more competitive rivalry. Using a global sample from 1949 to 2000, we find that rival dyads trade less than others, and that the negative impact of this on equal-power dyads is greater than that for unequal-power pairs.