Ex Tridenti Mercatus? Sea-power and maritime trade in the age of globalization

• We test if naval powers promoted commerce during the late 19th and early 20th centuries.
• We empirically examine the first global naval arms race.
• England and France were the primary naval players during this period.
• Naval powers bolstered their own commerce but damaged the trade prospects of other countries.

This paper tests an implication of the hypothesis that hegemons provide increased global stability and thus promote international commerce. Specifically, we measure the influence of naval power projections on global trade during the latter 19th and early 20th centuries, a time of relative peace and robust commercial activity. We use archival data on the navies of Britain, France, the United States and Germany, capturing longitudinal measures of ship deployment, tonnage, and ship personnel. First we develop an empirical naval arms race model, and demonstrate that the navies of Britain and France in particular responded rigorously to each other. We then use our estimates of naval power projected around the world by Britain and France to measure their effects on bilateral trade in a panel-data gravity model. Results indicate that while navies had some positive impact on their own nation's trade, other nations' trade suffered. Our results show that rather than bolster globalization, the first global arms race damaged commercial interests and lowered trade potential around the world.