Trade, conflict, and political integration: Explaining the heterogeneity of regional trade agreements

Many historians argue that the main goal of European trade integration was the preservation of peace. This paper investigates whether this reasoning is relevant for the EU and other regional trade agreements (RTAs). I provide empirical evidence that customs unions and common markets (deep RTAs) do reduce the probability of war between members. Partial scope and free trade agreements (shallow RTAs) however have no effect on war probabilities. Accordingly, international insecurity has a differential impact on incentives to create RTAs. Deep RTAs are signed between countries that are involved in many interstate disputes and that have low trade costs with the rest of the world, whereas the opposite is true for shallow RTAs.

► International (in)security is a motive for the creation of regional trade agreements. ► Deep RTAs, involving political integration, prevent war between members, but not shallow RTAs. ► Country pairs having a higher probability of conflicts and more open to trade are more likely to sign deep RTAs. ► The opposite is true for shallow RTAs.