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Restricting Trade Increases Political Violence

Image credit: Markus Distelrath (Pixabay: Creative Commons)

President Donald Trump’s decision to impose trade regulations on steel and aluminium imports is seemingly motivated by a desire to rectify “the largest deficit in the history of our world”. Following the restriction of steel and aluminium imports, media attention has concentrated on the potential eruption of a trade war between Beijing and Washington. Despite the clear relationship here between trade restriction and conflict, it is important to remember that regulations are often used as tools to mitigate conflict.

When China released a lengthy list preventing certain products or technologies that might be used by Pyongyang to build weapons of mass destruction, the logic was that these trade regulations would prevent conflict. Indeed, most major states regulate items that might have dual purpose. That is, items that might be used for civilian purposes as well as military purposes. For example chemicals, fertilisers, or raw materials all constitute dual-use goods. In the aftermath of the shooting down of the Malaysian Airline Flight MH17 over Ukraine, the EU (a major trading partner to Russia) restricted exports to Moscow’s oil companies and exports of goods related to the production and manufacturing of Russian arms. Although these trade measures are implemented to reduce conflict, a recent study has found that security-motivated trade restrictions can increases threats to security

The effect of economic sanctions can be complex, but it’s not undocumented. Some studies have suggested that economic sanctions are redundant policy instruments, while others show they might be effective – particularly if they are endorsed by international organisations such as the IMF. These measures are likely to negatively impact the socio-economic welfare of many; yet the link between economic conditions and the potential for violence is hazy. Until recently, several studies had found little, or no correlation at all between poverty and terrorism.

Past assumptions dictating policy on trade and conflict have been debunked by ground-breaking research compiled by Amodio, Baccini and DiMaio (2017). Their study focused on the effects of imposed trade restrictions by Israel to the West Bank in 2008. The West Bank and Gaza Strip are exclusively dependent on the Israeli economy. Occupation has enabled Israel to control exports in the region, and as of the first of January 2008, Israel listed 56 input items that would be restricted from entering the West Bank. Among the list of items targeted included dual-use goods for military operations. The findings had fascinating implications for how governments use trade restrictions to combat conflict. The restriction on the import of certain goods and materials lowered both the wages and the output of those intensive sectors. Since these sectors were so dependent on the banned inputs, production and pay suffered. Furthermore, the local labour market conditions deteriorated in those pockets where employment was necessarily acute. Interestingly, and contrary to prior assumptions, the result of these economic shocks made episodes of escalated political violence more likely. Security-motivated restrictions on trade contributed to 17.6% of violence in the West Bank between 2008-2014. Rather than the intended effect of designing measures to mitigate conflict, the restrictions fuelled political violence.

The findings have important political implications for policy-makers all over the world — trade and security are interwoven issues that suggest policies that target one might have a negative trade-off for the other. Although the Occupied Palestinian Territory case study focused on a unique region, the Israeli army is one of the most efficient and effective in the world. This would imply that translating the argument to different regions with average military capabilities would find even stronger evidence.

Given the waves of protectionism and trade restriction that the liberal order is experiencing under multiple major powers, these findings have important implications for the escalation of conflict. Australia itself has pledged to restrict dual-use goods that “might be used in internal or external conflict or that could further militarise the situation in the destination country”. If inducing trade restrictions creates economic hardship and thereby triggers political violence, policy-makers should focus on improving economic conditions and liberalising trade for different regions prone to conflict.

Hayley Pring is the International Trade and Economy Fellow for Young Australians in International Affairs.

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