Trading Away from Conflict (Using Trade to Increase Resilience in Fragile States)

The world is getting richer, but fragile countries and territories are not. By 2015, most of the poor will live in these economies, most of which have been or still are affected by civil conflicts. Trading Away from Conflict finds evidence of an important factor affecting conflict: trade, and in particular, trade policy. On the one hand, trade brings resources and creates jobs, and in turn, those add to stability. On the other hand, trade itself is also volatile and can increase the value of predating exportable commodities. This book tries to help policy makers in fragile countries to use trade to reduce the risk of conflict. To do so, it lays out a framework for studying the relationship between trade and conflict, reviews previous studies, revisits and expands the cross-country evidence, and analyzes new country case studies. On the basis of the analysis, it offers trade-related policy directions to reduce this risk in fragile economies. The results provide convincing evidence that trade and trade policy have a large impact on the risk and intensity of conflict. In particular, higher minerals and oil exports raise the risk of conflict because there is a high incentive to fight over their control. This is seen in a number of countries—and was the case in Nigeria until the government reached an agreement that directed some resource revenues to militants. The results in the book also show that trade-related increases in real incomes and employment reduce the risk and intensity of conflict. A high volume of trade with neighbors is likely to shorten conflicts and make them less severe. These effects are particularly strong in more ethnically divided and unequal settings, in countries and territories with a recent history of or ongoing conflict, such as the West Bank and Gaza, as well as in those with low levels of accountability and transparency. Trading Away from Conflict will help readers understand part of the dynamics of some current conflicts such as those in Nigeria and the Republic of South Sudan, quantify the effect of various trade shocks on conflict across and within economies, identify some conditions when this effect is larger, and evaluate measures to use trade to increase conflict resilience in fragile settings.