How Do Commercial Institutions Promote Peace?

Abstract

The commercial institutional peace research program has provided empirical evidence that such regional institutions help reduce the incidence of militarized interstate conflict. But it remains unclear how regional commercial institutions produce their observed pacific effect. This article examines three different causal arguments to explain the commercial institutional peace. First, commercial institutions simply increase the economic opportunity costs of war for the state. Second, some commercial institutions provide information to member-states about the military capabilities of other institutional participants, which may make their bargaining for peace more efficient. Third, many commercial institutions bring high-level state leaders together on a regular basis, building trust to overcome certain commitment problems in international bargaining. The statistical results show empirical support for only the third explanation. Commercial institutions with more organs for high-level state leaders demonstrate a substantively strong and statistically significant effect in reducing the outbreak of military conflict. But commercial institutions with deeper economic integration and nested military–security structures are not associated with less military conflict. Together, these results suggest that the observed commercial institutional peace does not stem from economic integration per se, but rather from certain institutional structures that often accompany the regional integration process. Thus, the commercial institutional peace appears more related to the third leg of the Kantian tripod (international organizations) than to the second leg (international commerce).