As the premiers of Canada’s 13 provinces and territories met last week in Ontario, with Prime Minister Carney making an appearance on Tuesday, the looming August 1 deadline to reach a new free trade deal with the United States was top of mind.
And with the threat of 35 percent tariffs on non-CUSMA-compliant Canadian goods potentially disrupting our mutually beneficial trade relationship even further, it’s little wonder this issue is a priority. Consumers and producers from both countries suffer when protectionist policies make it more expensive to buy and sell from one another across the border.
But the cost of disrupting trade is not measured solely in dollars and cents.
Though it may seem fanciful to think of troops clashing along the world’s longest “undefended” border in this day and age, classical liberal thinkers long ago warned that peace itself can be a casualty when nations start cutting the trade ties that bind. Their warnings remain as stark and relevant as ever, and are moreover supported by extensive modern scholarship.
Le doux commerce
A number of 17th- and 18th-century thinkers espoused le doux commerce—the “sweet” or “gentle” commerce theory—according to which trade promotes peace, while its absence makes war more likely. French Enlightenment philosopher Montesquieu wrote, “Commerce is a cure for the most destructive prejudices,” arguing that it promoted gentle manners, not just among individuals but among countries: “Peace is the natural effect of trade. Two nations that traffic with each other become reciprocally dependent.”
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American Founding Father Thomas Paine agreed, writing that “commerce, though in itself a moral nullity, has had a considerable influence in tempering the human mind.” Because of the wealth it affords, Paine thought that countries in his time were incentivized to trade with other countries that they would have gone to war with in former, less commercial ages. There are several plausible explanations for the civilizing effects of trade. Patrick McDonald, associate professor in the department of government at the University of Texas at Austin, has listed four related but distinct mechanisms: opportunity cost (trade makes conflict expensive); efficiency (commerce is cheaper than conquest); sociology (trade builds cross-border trust); and bargaining (commerce helps states communicate and negotiate to avoid war). McDonald specifies that it is not just trade, but free trade, that promotes peace. And by this metric, he argues, the First World War, far from being the counterexample that conventional wisdom would make of it, eloquently illustrates the dangers of protectionism. It is true that the 19th-century global economy was a largely open trading system that fostered interdependence among participating countries. The outbreak of war in 1914, therefore, seems to offer evidence against the pacifying effects of trade. However, McDonald points out that this era’s globalization was mostly driven by “a sustained reduction in transportation costs and not by a reduction in protective regulations.” In fact, there had been a backlash against globalization after 1879, leading to an increase in protectionism in Europe. In the years leading up to the catastrophic global conflagration, Germany used protectionist tariffs to unify agricultural and industrial elites, creating a powerful domestic coalition that backed its aggressive imperial policy of Weltpolitik. Indeed, there were “wide-ranging tariffs” in Europe at the time, with Russia receiving “nearly two-thirds of its public revenues from tariffs and state-owned assets.” In such conditions, military conflict was sadly a predictable outcome according to the doux commerce theory. Peace by the numbers Of course, an anecdote does not a proof make, but statistical analysis confirms the inverse relationship between commerce and conflict described and illustrated above. In a 2007 study, Erik Gartzke, professor of political science and director of the Center for Peace and Security Studies at the University of California, San Diego, found that a one-unit increase in the lower financial openness score of a state pair reduces the likelihood of war between the two states by 37 percent. Democracy also had salutary effects, with a one-unit increase in the lower democracy score decreasing the likelihood of war by approximately 12 percent. McDonald, for his part, finds robust stats that suggest both trade and democracy greatly encourage peace. According to him, a reduction of tariff levels from 27 percent to 5 percent will reduce the probability of military conflict by over 40 percent, while the shift from highly autocratic to highly democratic reduces it by 47 percent. In short, embracing global commerce and reducing barriers to trade isn’t just good economics—it’s a path to stability. With geopolitical tensions on the rise, doux commerce theory remains a compelling framework for international peace, strongly supported by empirical research. Timeless Enlightenment theories as well as contemporary research suggest that by championing global economic freedom, we can leverage trade’s potential to simultaneously bolster our economies and mitigate militarized conflict. As sociologist Erich Weede puts it, “Peace by trade [is] a rare case of a desirable end that is attainable by a desirable means.”
