Limited commercial integration between India and Pakistan, or within much of the Middle East, suggests that conflict between countries can have a detrimental effect on their economic relations. Indeed, a number of studies in the international relations literature have shown that, in fact, tension or conflict between countries tends to be correlated with lower levels of economic exchange. Yet rapidly growing economic integration between Mainland China and Taiwan suggests that economic interdependence can also flourish in the presence of severe political tension and a potential for military conflict. Clearly, the relationship between political conflict and economic interdependence is one that varies considerably across cases, and in this dissertation I develop an argument that seeks to account for such variation. I argue that conflict can have a negative impact on commerce for a number of reasons, but that these effects are contingent on the political strength of internationalist economic interests within domestic polities. When these interests are strong, leaders try to keep conflict from affecting their foreign commercial relations, and as such the independent effects of conflict are limited. When internationalist economic interests are weak, international conflict has a strong and independent negative effect on cross-border commerce. To test my argument, I conduct statistical analyses of international trade and investment flows for a large sample of countries over an extended period of time. Using UN voting patterns as a proxy for conflict, and overall trade openness as a proxy for the political strength of internationalist economic interests, I find that conflict has much stronger independent effects when internationalist economic interests are weak. I also examine the relationship between conflict and commerce within two cases: Mainland China-Taiwan relations, and India-Pakistan relations. I show that the growing political clout of internationalist economic interests in both Mainland China and Taiwan has been a key reason why commerce has flourished in that case despite serious political rivalry. In the India-Pakistan case, by contrast, internationalist economic interests have held relatively limited political influence, and as a result, leaders have not paid high costs for allowing bilateral political conflict to undermine the bilateral economic relationship.
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