Friday, April 9, 2010

Peace and Trade

And second, here's an interesting piece on the Voxeu web site.

If you read The World Is Flat by Thomas Friedman, particularly the first edition, you are familiar with the idea that globalization reduces conflict. Friedman states that no two countries with McDonalds had ever gone to war. That no longer holds, I believe. But the idea is that trade promotes peace. The economic gains from trade outweigh the potential losses from warfare. Therefore it is in the interest of the countries to find a different channel to resolve conflicts.

While noting that political and historical benefits may be stronger motivators for trade agreements (bilateral and regional) than the economic benefits, the authors point out that they are not substitutes but can be viewed as complements. I'm not really doing the article justice, but I hope you will find it interesting.

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