This is a guest post from Michael Trebilcock, Emeritus University Professor of Law and Economics, University of Toronto
An almost timeless debate going back to philosophers in Greek and Roman times surrounds the issue of whether increased economic interdependence between and among states in the form of cross-border trade and investment, apart from its putative mutual economic benefits, also yields an enduring peace dividend. The ancients were divided on this issue, with the preponderant view generally sceptical of economic interdependence on the grounds that the coarse manners and material values of foreign merchants risked compromising the morals and civic virtues of their domestic citizens. However, even at this time there were dissenting voices. For example, the Greek philosopher Plutarch argued that resources of various kinds were unevenly distributed across the world in order to facilitate peaceful interactions among all the citizens of the world. This view was taken up by Stoic philosophers early in the first millennium, in part relying on notions of the universal brotherhood of mankind[1].
Similarly, some philosophers and legal theorists in the middle to late Middle Ages, including Immanuel Kant, Hugo Grotius, Montesquieu, and John Stuart Mill, all argued in one vein or another that increased economic interdependence yielded a form of positive cosmopolitanism that softened the hard edges of nationalism and reduced the risk of military conflict among nations. In this vein, at a time of rapidly increasing international trade and investment, a famous book by Norman Angell, The Great Illusion[2], published just before World War I, argued that wars of occupation were likely to entail horrendous human and material costs compared to mutually beneficial trade among neighbouring states. Yet World War I broke out shortly after the publication of his book, raising enduring doubts about the peace dividend from increased economic interdependence, and raising in turn the possibility that causation ran in the opposite direction-from peace, however achieved, to trade – e.g. the rise of Germany and Japan as major trading nations post-World War II[3].
The interwar years, and particularly the Great Depression, were marked by a retreat from economic interdependence, exemplified by competitive currency devaluations and reciprocal trade restrictions eg the US Smoot-Hawley tariff, that almost certainly exacerbated the Great Depression. Another world war quickly followed, with catastrophic consequences for all its participants. However, emerging from the ashes of World War II, many countries around the world committed themselves to a “Never Again” strategy in the form of various commitments to multilateralism. On the economic front, the Bretton Woods Agreement of 1944 between the US and Britain led shortly thereafter to the formation of the General Agreement on Tariffs and Trade (the GATT, and as of 1995 the World Trade Organization), where all countries would trade with each other under a common set of ground rules, with some dispensations for developing countries adopted in the ensuing two decades, and the creation of the International Monetary Fund and the World Bank. On the broader political front, the aftermath of the war quickly led to the creation of the United Nations and its various agencies and the Universal Declaration of Human Rights in 1948, followed almost three decades later by its human rights covenants. While a regional agreement, the emergence of the European Community in the early post-war years was also widely conceived of as a peace treaty as well as an economic treaty, where increased cross-border trade, investment and movement of people would cement the peace.
These various manifestations of multilateralism, or least broad regionalism, were widely seen as a common commitment to adherence to a basic set of common ground rules governing economic and political relationships among states. The outbreak of the Cold War between the Soviet Union and the US and its allies, with the UN Security Council largely crippled by the veto rights of its permanent members, severely compromised adherence to such a set of commitments, although international trade and investment grew at rapid rates among many other countries. The collapse of the Soviet Union in the early 1990s precipitated a renewed spirit of optimism that the world was finally converging on a common set of broad economic and political ground-rules. This spirit of optimism is reflected in widely read fin de siècle books such as Francis Fukuyama, The End of History[4], which portrayed the world as converging on a form of liberal democratic capitalism, and Thomas Friedman, The Lexus and the Olive Tree and The World is Flat[5] who popularized venerable notions of the universal economy subscribed to by some ancient and medieval philosophers in his Golden Arches thesis-that countries with many McDonald and similar universal franchises are unlikely ever to go to war with each other. Other scholars such as Amartya Sen[6], Kwame Anthony Appiah[7], and Peter Singer[8], both in their scholarship and in their personal life trajectories seek to demonstrate that relatively free movement of goods, services, capital, technology, people and ideas across borders yields a desirable form of cosmopolitanism that softens the sharp edges of nationalism and its potential for military conflict. Many commentators argued in the early years of the current century that economic liberalization in the case of China (and probably Russia) would over time also lead to political liberalization, thus mitigating the risk of future military conflict, in part reflected in the accession of China (2001) and later Russia (2012) to the WTO, on the theory often attributed originally to Kant in his book, Perpetual Peace, that democracies rarely go to war with each other. But we now turn to the contemporary context.
Russia has invaded Ukraine and threatened the possibility of nuclear conflict, and in the context of Western economic sanctions and counter- sanctions by Russia, threatened to cut off or reduce oil and gas and food supplies to Europe and other countries (despite the fact that Russia and Ukraine had many Golden Arches and similar Western franchises). China, in turn, has become increasingly authoritarian and nationalistic and has precipitated equally antagonistic reactions from some of its principal trading partners, in particular the US, entailing trade sanctions and counter sanctions, while the US during the Trump administration more generally retreated from its international commitments, such as withdrawing from the Paris Climate Change Agreement in 2015, the World Health Organization, the Transpacific Partnership Agreement, and the dispute settlement body of the World Trade Organization (along with restrictive immigration policies). While some of these decisions have been reversed by the current Biden administration, it has also imposed new trade restrictions on exports of semiconductors and similar electronic inputs to China and has not agreed to reinstate the dispute settlement body of the WTO or to rejoin the Transpacific Partnership Agreement. Trade policy via trade sanctions has increasingly been “weaponized”.
Currently, there is much talk in Western government circles of “friend-shoring”-trading only with our political friends- which is likely to exacerbate trends evident from the early 1990s towards the fragmentation of the international trading regime into a proliferation of regional or preferential trade agreements, reinforced by the proliferation of nationalist or populist political movements in many countries around the world in recent years (including Britain’s Brexit decision to leave the EU in 2016). “Make America Great Again” and “Take Back Control” find analogues in many such movements. This fragmentation and weakening of commitments to multilateralism more generally does not augur well for the prospects of global cooperation on such existential threats as pandemics, climate change, and nuclear conflict[9]. All these contemporary developments put in question the thesis that increased economic interdependence yields peace and related non-economic benefits for the world and augurs a depressingly bleak geo-political future, unless the early optimism that accompanied the creation of the major post-war multilateral or broad plurilateral institutions[10] can be rekindled. The Friedman Golden Arches thesis, and its more general cosmopolitan antecedents, that trade yields peace has never been under more serious challenge. The “Never Again” adage faces a perilous future.
[1] Douglas Irwin, Against the Tide: An Intellectual History of Free Trade, (Princeton University Press, 1990).
[2] Norman Angell, The Great Illusion, (G. P. Putnam’s Sons, 1980).
[3] Mancur Olson, The Rise and Decline of Nations (1982).
[4] Francis Fukuyama, The End of History and the Last Man, (1992).
[5] Thomas Friedman, The Lexus and the Olive Tree: Understanding Globalization (2000); Friedman, The World Is Flat: A Brief History of the Twenty-first Century (2007).
[6] Amartya Sen, Identity and Violence: The Illusion of Destiny (2013); Home in the World: A Memoir (2022).
[7] Kwame Anthony Appiah, Cosmopolitanism: Ethics in a World of Strangers (2010); The Lies That Bind: Rethinking Identity (2018).
[8] Peter Singer, One World Now: The Ethics of Globalization, (2016).
[9] See Martin Wolf, “Geopolitics Is the Biggest Threat to Globalization”, Financial Times November 2, 2022, Raghuram Rajan, “Deglobalization is a Climate Threat”, Project Syndicate November 20, 2022.
[10] Wolf op cit; John Plender, “Why Trade couldn’t buy peace” Financial Times September 23, 2022.
