When does liberal peace fail? Trade and nationalism

Liberal peace research maintains that trade interdependence promotes interstate peace. In this study, I introduce nationalism as an important domestic factor and examine how it fares against trade as an explanation for war and peace and their interaction effects. I propose that when state leaders promote nationalism to bolster political legitimacy, they may not be incentivized to foster liberal peace through trade and instead may be willing to conflict with trading partners. A cross-national, time-series statistical analysis shows that nationalist leaders are likely to cause the pacifying effect of trade to fall apart and increase the likelihood of (fatal) militarized disputes, but not necessarily open warfare. These findings suggest that when politico-security interests of nationalist leaders collide with global economic interests, the former prevail over the latter in the context of low-level conflict, but not necessarily high-level conflict. Even nationalist leaders appear to be cautious of engaging in all-out bloody war with trading partners—the economic pain is greater than the gain. Nevertheless, the overall analysis indicates that liberal peace theory may be not as sure a safeguard as previously believed since it is ineffective in lowering the risk of dyadic disputes short of war in the era of rising nationalism.