In recent years, the concept of “de-risking” has emerged prominently in discussions of global trade and economic security. As countries navigate an increasingly unstable international landscape, leaders are tasked with making strategic decisions that can impact not just economies, but also geopolitical relations. In this context, it’s worth examining how trade can serve as a stabilizing force, despite concerns about economic coercion.
Conor here: I remember an insightful remark made by Bernd Lange, the German Chairman of the International Trade Committee (INTA) at the European Parliament. Early on in the de-risking discourse, he noted, “Sometimes you have to put a gun on the table, even when you know that you might not use it.”
It seems Lange may be unaware of Chekhov’s gun principle. The EU’s approach, as articulated by Lange, certainly does not contribute to any substantial peace dividends.
The term “de-risking” has gained traction particularly in Europe, where it is often believed to mitigate conflict. The authors of the piece that follows argue that, contrary to expectations, this policy can actually heighten the risk of conflict. This insight is not unexpected, considering recent missteps by European leaders.
There is no denying that nations should seek out more secure trading partners as a response to our increasingly chaotic world. However, it would be beneficial if leaders could formulate a coherent strategy. Take the EU, for example: it remains significantly more reliant on China for both imports and exports compared to the United States. Imports from China have increasingly become “strategic,” exacerbating Europe’s vulnerabilities amid rising energy costs due to distancing from Russian energy sources. One might assume that such challenges would act as a cautionary tale; however, Ursula von der Leyen and her team continue to push forward, ignoring alarming data, like the fact that the EU relies on China for over 90 percent of certain pharmaceuticals, chemicals, and materials—sometimes with no available substitutes. Oops.
In March, the World Bank reversed its long-standing position after more than three decades, admitting that it had been misguided in advocating for Western nations to outsource almost all their industries. Now, they find themselves facing the daunting challenge of reindustrializing under neoliberal policies. Thus, the “guns” remain on the table.
By Ling Feng, Qiuyue Huang, Zhiyuan Li, and Christopher Meissner. Originally published at the Centre for Economic Policy Research.
Recently, governments have renewed their focus on de-risking, a policy aimed at limiting trade to mitigate economic coercion. This column posits that such policies overlook the security advantages that trade can provide. Research indicates that doubling bilateral trade can reduce the likelihood of militarized conflict by about 30%, indicating a tangible ‘peace dividend’ resulting from international trade. As nations strive to minimize dependency on global supply chains, it’s crucial to consider how these efforts might inadvertently increase the risks of costly international conflicts.
Since 2018, ‘de-risking’—intended to lower economic vulnerabilities—has become a primary theme in discussions of global economic security. Due to fears that economic dependencies may be weaponized or jeopardized, many nations have endorsed de-risking measures alongside diversification, investment screening, and export controls. Geopolitical concerns are already altering the landscape of global trade (Aiyar and Ilyina 2023, Alfaro and Chor 2023, Bosone et al. 2024, Doan et al. 2026).
While it’s valid to address strategic vulnerabilities, the current policy dialogue may have shifted too far toward precaution. By concentrating predominantly on the coercive aspects of trade, the narrative overlooks a significant counteracting force: trade can actually decrease the likelihood of military confrontation by making such actions economically disadvantageous.
This concept, often discussed as ‘commercial peace’, is a well-established notion in both economics and political science (Polachek 1980, Martin et al. 2008). However, empirical evidence establishing a direct causal relationship between trade and conflict has been elusive. The interplay between trade and conflict often leads to reverse causality, where trade may promote peaceful relations, while war-prone country pairs may engage in lesser trade, skewing the observed effects. Additionally, while advancements in communication may enhance trade, they can simultaneously exacerbate nationalistic sentiments and ‘civilizational conflicts’ (Huntington 1996).
In our recent research, we tackle this empirical challenge by examining how advancements in aviation technology impacted global trade patterns, allowing us to isolate the pacifying effects of trade (Feng et al. 2026).
The Geography of the Aviation Revolution
To assess the causal effects of trade on peace, we leverage advancements in air travel. As air transport became more affordable and quicker in the late 20th century, the impact was not equally felt across all country pairs. Instead, certain pairs benefited considerably from newfound air routes that offered significant shortcuts over longer maritime paths, leading to a marked increase in trade.
Table 1 highlights this geographic variation alongside historical conflict occurrences. The sea-to-air ratio indicates the detour required by maritime shipping in comparison to direct flights. The data reveals that militarized conflicts are particularly concentrated among geographically close country pairs, with over 76% of disputes arising between nations located within 5,000 kilometers of each other. Notably, these same short- to medium-distance pairs also exhibit the highest average sea-to-air ratios, ranging from 1.69 to 1.91, alongside the greatest variation in those ratios.
Table 1 Conflict and aviation geography by direct air distance, 1962–2014
Notes: Table reports the distribution of conflicts by direct air distance, for the period 1962–2014. For country pairs falling within each air-distance range, the table reports (1) number of pairs, (2) number of conflicts occurring within these pairs, (3) average sea-transport distance, (4) average sea-to-air distance ratio, and (5) the standard deviation of this ratio. Source: Feng et al. (2026), Table 2.
This correlation between high levels of conflict risk and considerable geographical shortcuts afforded by aviation provides an optimal environment for assessing the causal impacts of international trade on conflict. Given that these geographical factors are largely dictated by physical geography rather than the political decisions of governments, they serve as useful predictors of trade reallocations, enabling us to better isolate the peaceful effects of economic integration.
Defusing Crises: Less Conflict, Softer Rivalry
Our analysis affirms a robust and economically significant ‘peace dividend’ tied to international trade. Our preferred instrumental-variable estimates indicate that a doubling of bilateral trade reduces the chances of militarized conflict by approximately 30%.
Moreover, trade diminishes the severity of conflicts. Our findings suggest that increased trade integration lowers the likelihood of disputes escalating into extreme hostility, which involves military action and significant casualties.
This pacifying effect is observable even before conflicts escalate militarily. Analysis of strategic rivalries indicates that trade lessens the probability of two countries perceiving each other as rivals. This effect is especially evident in positional rivalries—where competition over status, influence, and regional standing is at stake. Thus, trade appears to mitigate tensions before they escalate into crises.
The Geography of Trade’s Peace Dividend
To evaluate the significance of trade, we utilize our baseline instrumental-variable estimates to determine, for each country, the projected reduction in conflict probability attributable to trade integration.
Our analysis reveals that the most substantial peace dividends are concentrated in East and Southeast Asia. Nations that have undergone rapid industrialization and deep integration into global value chains, such as China and South Korea, rank highly in conflict reduction. This trend also holds true for countries like Myanmar, the Philippines, and Thailand.
Figure 1 charts the predicted peace gains (i.e., reductions in the likelihood of war) against historical declines in militarized disputes. The correlation is not only positive but also statistically significant. Countries our model identifies as primary beneficiaries of the aviation-driven trade expansion also experienced the most substantial reductions in conflict. Significant peace dividends appear to accompany increased trade in many East and Southeast Asian economies.
Figure 1 Actual and fitted reductions in the probability of conflict by country
Notes: The horizontal axis reflects the fitted reduction in conflict probability in 2012 from the baseline model, compared to a counterfactual scenario where bilateral trade reverts to 1970 levels. The vertical axis showcases the actual country-level reduction. Each dot represents a country.
Source: Feng et al. (2026), Figure 6b.
Unpacking the Mechanisms: Where Does Trade Matter Most?
Hidden within these overall peace dividends lies a geographic logic. Our data show that the conflict-mitigating effects of trade are particularly pronounced where the aviation revolution instigated significant transformations in trade patterns.
Firstly, trade significantly curbs conflict among pairs of nations with high sea-to-air distance ratios. For pairs where air transport did not offer a meaningful geographic advantage over maritime shipping, the pacifying impact of trade remains minimal and statistically insignificant.
Secondly, this effect is predominantly observed in non-island nations. Trade’s influence on conflict is limited among pairs that include at least one island country, which are naturally inclined to rely on maritime routes. In contrast, continental pairs demonstrate a tendency for the aviation-linked trade boom to mitigate political tensions.
Lastly, the timing of these peace dividends coincides with the rise of modern globalization. When we examine the data chronologically, we notice that before 1980, the estimated relationship between trade and conflict was negligible. However, post-1980, as long-range aircraft and contemporary logistics began to play a vital role in global production networks, the beneficial impact of trade on reducing conflict became pronounced and reliably measured.
Do Not Evaluate Benefits and Costs of Production-Network Fragmentation With One Security Margin
By emphasizing how interdependence can expose nations to shocks or coercion, policymakers may inadvertently undervalue the advantages of international trade. Trade has the potential to heighten the opportunity costs of conflict and enhance incentives for diplomatic restraint (Martin et al. 2008, Mayer et al. 2025). While a nation less engaged with the global economy may seem safer from coercion, evidence suggests that reduced integration can exacerbate international rivalries, heightening the likelihood of outright warfare.
The pressing policy dilemma for the 21st century is not a simple choice between ‘openness’ and ‘security’. Rather, nations should evaluate the benefits of de-risking in light of both economic and security implications.
Ultimately, moving forward, the key policy distinction will not be between openness and security but rather in finding a balance between detrimental dependence and constructive integration.
References
Aiyar, S, and A Ilyina (2023), “Geo-economic fragmentation and the world economy”, VoxEU.org, 27 March.
Alfaro, L, and D Chor (2023), “A perspective on the great reallocation of global supply chains”, VoxEU.org, 28 September.
Bosone, C, E Dautović, M Fidora, and G Stamato (2024), “How geopolitics is changing trade”, VoxEU.org, 14 May.
Doan, T T H, A Ito, C Luo, and H Zhang (2026), “Geopolitical risk and supply chain diversification”, VoxEU.org, 23 February.
Feng, L, Q Huang, Z Li, and C M Meissner (2026), “The ‘peace dividend’ of international trade: A new empirical approach”, NBER Working Paper No. 35078.
G7 (2023), “G7 Hiroshima leaders’ communiqué”, 20 May.
Huntington, S P (1996), The clash of civilizations and the remaking of world order, New York: Simon and Schuster.
Martin, P, T Mayer, and M Thoenig (2008), “Make trade not war?”, Review of Economic Studies 75(3): 865–900.
Mayer, T, I Méjean, and M Thoenig (2025), “The fragmentation paradox: De-risking trade and global safety”, CEPR Discussion Paper 20564.
Polachek, S W (1980), “Conflict and trade”, Journal of Conflict Resolution 24(1): 55–78.
