The International Politics of Trade: The Nexus between Economic and Security Agreements

Zhengqi Pan


How and under what conditions do bilateral and multilateral trade agreements affect the formation of defense cooperation networks between the countries involved? More broadly, what are the linkages between economic cooperation and security pacts? Extant research shows that countries -- notwithstanding political affinity -- that are in the same alliance network would trade more heavily with each other, given that the prosperity of individual allies would correspondingly bolster the alliance structure as a whole, while not accelerating the security dilemma between the partner countries. In other words, countries in the same alliance network are much less likely to threaten each other militarily as a result of potential military buildup from the gains of trade. In a similar vein, current research also points to the finding that countries in the same defense pact would be more likely to sign free trade agreements with each other. This paper builds on the international trade and security literature, but turns the question around by looking at the reverse causal process of how trade agreements affect the probability of defense cooperation pacts. I argue that with dense globalization since the 1980s, countries are much more interconnected through trade and global production networks and hence have the incentive to sign trade agreements with each other to facilitate trade with or without being military allies in the first place. However, the formation of trade agreements acts as the first step to deeper cooperation that spills over to the security realm. Consequently, countries connected through trade agreements would be more incentivized to step up security cooperation with each other, in the form of defense cooperation agreements, to not only enhance their military security and lower the security dilemma among trading partners, but also to protect their vital economic interests by strengthening their overall defense network. I test my claim through an advanced statistical network analysis method called the Temporal Exponential Random Graph Model (TERGM), which allows me to account for the complex interdependence of observations and compute the endogenous structural effects of networks. In addition, I base my statistical testing on novel data on trade and defense cooperation agreements, with nearly 1 million observations in total, covering 180 countries between the years 1980 and 2010. This paper contributes to the analysis on the geopolitics of trade agreements and highlights how economic cooperation enhances the probability of security pacts formation.

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