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⁴ As Findlay and O'Rourke explain, industrializing states in Europe and North America leveraged growing economic asymmetries to expand their political influence and military power, subjugating large portions of Asia and Africa. As such, growing volumes of global trade served to facilitate and complement, rather than reduce, conflict. Findlay and O'Rourke, Power and Plenty, p. 388.

⁵ We refer specifically to horizontal intra-industry trade.

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³² This process is costly, which may deter conflict, ceteris paribus. Again, however, because these exit costs may not be equal (i.e. if one state can redirect lost dyadic trade more easily), asymmetric exit costs may be a point of contention within the dyad (see Peterson, ‘Dyadic Trade, Exit Cost, and Conflict’), leading to an overall unclear impact of inter-industry trade on conflict. Although it is possible for inter-industry trade to result in comparable levels of dependence for each trade partner, a condition that could be associated with higher prospects for peace, inter-industry trade often involves the trade (in one direction) of strategically vital commodities, potentially leading to asymmetry in dependence – and the vulnerability inherent therein – that introduces considerable error into the overall influence of trade.

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³⁴ This would also be true in instances where non-branded, undifferentiated commodities are exchanged in a dyad, such as trade in similar grains or types of steel between the United States and European Union member states.

³⁵ Again, non-branded intra-industry trade (e.g., bilateral trade of steel, which occurs between the United States and several European Union states) does not bestow this additional pacifying influence; however, the mere lack of vulnerability associated with non-branded intra-industry trade suggests that the opportunity cost effect results in a pacifying influence (see Polachek, ‘Conflict and Trade’) because the absence of strategic vulnerability suggests an absence of tension. However, because the added benefit of consumer demand for variety – and mutual brand recognition – is absent, non-branded intra-industry trade should be somewhat less pacifying than the branded variant.

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³⁹ Although some intra-industry trade in automobiles occurs between the United States and Japan, these trade flows historically have been comprised primary of Japanese exports to the United States. More efficient Japanese vehicles (along with cultural preference) result in relatively low imports of American vehicles.

⁴⁰ The American automotive industry serves as an example in which protectionism was beneficial for intra-industry trade. In the 1980s, superior Japanese vehicles threatened to drive American automakers out of business. Japan agreed to voluntary export restraints (VERs), which limited quantity and raised prices of Japanese vehicles relative to American substitutes, increasing domestic sales of American cars, and arguably saving American automotive firms. The General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO) rules increasingly proscribe non-tariff trade barriers, which we contend could have a detrimental effect on peace. Currently, the United States–Japan trade relationship appears strong and American automotive firms survive. If American car companies do collapse, however, forcing the United States to import all of its cars, then intra-industry trade will decrease and inter-industry trade will increase, relatively speaking, rendering the United States more vulnerable to its trade partners – notably Japan, from which it imports a large proportion of its automobiles. Of course, free trade is always the most efficient economically; however, economic inefficiencies associated with protectionism could decrease political tension in some circumstances, perhaps most notably when moderate protectionism fosters intra-industry trade.

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⁴⁴ This argument suggests the question: when is specialization aggravating or pacifying? Perhaps specialization is pacifying when states do not face incentives to use a trade partner's dependence as leverage in coercion attempts. Although this question is beyond the scope of this article, it presents a potentially very lucrative avenue for future research.

⁴⁵ Rosecrance, The Rise of the Trading State; Liberman, ‘The Spoils of Conquest’.

⁴⁶ Ultimately, we think that the occasionally coercive aspects of vulnerability introduce variation into an otherwise pacifying impact of trade gains. As mentioned above, future research can benefit from examining conditions in which specialization leads to coercion.

⁴⁷ Given that these hypotheses suggest the lack of a relationship between two variables, we construe non-significance in statistical tests of these variables as support for the hypotheses. However, this support should be interpreted modestly, given that it is much easier not to find statistical evidence of a relationship than it is to find statistically significant support for a relationship.

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⁵⁰ Although data on the extent of battle deaths are not always reliable, we are confident that they accurately capture whether there are any battle deaths. However, there are 46 observations in our dataset in which fatalities are missing. These MIDs are coded as non-fatal in our primary models. In robustness check models available from the authors, we examine these disputes in detail, coding fatal dispute as equal to 1 if there are recorded battle deaths at subsequent years in MIDs that last longer than one year. All results are robust in these robustness checks.

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⁵⁷ Importantly, this measure captures the proportion of dyadic trade that is intra-industry, not the flow of intra-industry trade or the proportion of either state's economy that depends on intra-industry trade. We address this issue below.

⁵⁸ This trade-balance weighting is suggested by Aquino, ‘Intra-Industry Trade and Inter-Industry Specialization as Concurrent Sources of International Trade in Manufactures’, in order to avoid under-representing intra-industry trade. For example, if a country has a severe trade deficit (importing more than it exports), then even if all of its imports and exports were within a single industry (and hence the index should equal 1), the simple index would report a smaller proportion of intra-industry trade because exports minus imports cannot equal zero.

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⁶³ Kono, ‘Market Structure, Electoral Institutions, and Trade Policy’.

⁶⁴ Also, somewhat less aggregated data, for example at the SITC-3 digit level, would nonetheless incorporate a considerably amount of vertical intra-industry trade, whereas we attempt to isolate the horizontal variant.

⁶⁵ As such, its SITC 5-digit code is simply 78120.

⁶⁶ Practically, intra-firm trade often is vertical intra-industry trade, although this is not a necessary occurrence.

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⁷⁵ Hegre, Oneal and Russett, ‘Trade Does Promote Peace’.

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⁷⁹ Specifically, the probability decreases from 0.0003 to 0.0002. All reported probability changes are significant at the 0.05 level. Percentage changes in probability are calculated as: (new probability − old probability)/old probability × 100. All substantive probabilities are very small, due to the fact that the median case involves dyad members over 4,000 miles apart, and with 16 years of peace. The baseline probability of fatal MID onset with all variables held at their medians is 0.0003.

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⁸² We calculate marginal effects of interactions using the margins command in Stata.

⁸³ A detailed examination of interaction effects supports this conclusion. Figures of these marginal effects are available by request from the authors.

⁸⁴ The inclusion of the interaction between the lower development and lower dependence in Model 6 complicates the interpretation somewhat, given that when trade dependence equals zero, intra-industry trade must also equal zero. Results are also robust when including a three-way interaction between development, trade and intra-industry trade; however, we do not present these models due to the difficulty in interpretation. These models are available by request from the authors.