One
of the fears in the wake of the minor skirmishes at the Line of Control (LoC),
which was deliberately hyped in India, was that it can negatively affect the
normalisation process between Pakistan and India and, by extension, the
movement towards trade and investment.
The
Indian prime minister’s statement, under pressure from the opposition
right-wing Bharatiya Janata Party as well as a large section of the Indian
media, that “this is not business as usual”, followed by partial suspension of
the relaxed visa regime, stoppage of the bus service across the LoC, refusing
to play Pakistani players in the Hockey India League and returning Pakistani
showbiz people enhanced fears that trade agreements effected late last year
might next be axed if the situation continued to slide.
While
India’s actions boosted the realist argument that ‘relative gains concerns’
will always determine a state’s response and militarised disputes, even short
of war, will badly impact trade between them, the liberals fretted over the LoC
moment and hoped that it will not become another bad episode in the history of
Pakistan and India whose relations have traditionally been fraught.
Better
sense has begun to prevail in India. Not unexpected, given the gradual fading
of histrionics on Indian TV screens. But fears that trade between the two
countries remains hostage to realist assumptions grounded in security as the
primary determinant of a state’s response to external stimuli, have again
increased.
In
other words, while realists are being smug over the fact that the moment proves
the realist theory right, liberals, arguing that trade and investment will
increase interdependence and thus reduce the chances of conflict, have gone
into a trepidation mode. They ask the usual question: how can Pakistan and
India be brought to the point where realist assumptions are defeated. To put it
another way, the liberals argue that all will be well when Pakistan and India resume
full trade but don’t know how to get the two sides there! In sum, they ‘accept’
the realist position implicitly in the first instance, but argue nonetheless
that once trade is given a chance, a different causality will kick into play,
trumping the realist assumptions. To rub it in, realists further argue that
even if trade ties were not to snap because of security concerns and trade in
fact increased, high interdependence will increase rather than decrease the
chances of conflict. They point to the well-known fact that the European powers
had very high levels of trade and high interdependence in the run-up to both
world wars. Going by the liberal argument, those levels of trade and
interdependence should have prevented war. But war happened, not once, but
twice and mutual dependence actually increased vulnerability rather than
decrease it.
So,
how does one explain that through the interdependence argument? The realist
correlation seems to be right but, as David Copeland argues in his International Security
article (Vol 20, no 4; Spring 1996), “trade levels had been high for the
previous 30 years [in the run-up to WWI]; hence, even if interdependence was a
necessary condition for the war, it was not sufficient.”
Copeland
offers a different approach and calls it a theory of trade
expectations:
“Trade
expectations theory introduces a new causal variable, the expectations of
future trade, examining its impact on the overall expected value of the trading
option if a state decides to forgo war. This supplements the static
consideration in liberalism and realism of the levels of interdependence at any
point in time, with the importance of leaders’ dynamic expectations into the
future.
“Levels
of interdependence and expectations of future trade, considered simultaneously,
lead to new predictions. Interdependence can foster peace, as liberals argue,
but this will only be so when states expect that trade levels will be high into
the foreseeable future. If highly interdependent states expect that trade will
be severely restricted — that is, if their expectations for future trade are
low — realists are likely to be right: the most highly dependent states will be
the ones most likely to initiate war, for fear of losing the economic wealth
that supports their long-term security. In short, high interdependence can be
either peace-inducing or war-inducing, depending on the expectations of future
trade.”
The
good news, however, is that trade is inevitable. To put it simply, until there
is a seller and a buyer, trade will happen. There is empirical data to support
this, compiled by Katherine Barbieri. Barbieri also co-authored with Jack Levy
an article in the Journal
of Peace Research (Vol 36, no 4, 1999), captioned, “Sleeping with the
Enemy: The Impact of War on Trade”. Barbieri and Levy maintain that “there
are numerous historical cases of trading with the enemy during wartime,
including trade in strategic goods that directly affect the ability of a state
to prosecute the war.”
Trade
will continue even when states are at war. While dyadic trade will be
negatively impacted, trade through third parties and circuitously will
continue. This is not to say that states must fight or that trade through third
parties in such circumstances is preferable to dyadic trade. The point is that
empirical data does not support the central tenet of the liberal theory that
trade promotes peace or the realist assumption that states, because of
vulnerability, will snap those ties. If there’s a demand for item X made by
state Y in state Z, X will get to Z, regardless of the conditions of war and
peace. This is also borne out by informal trade linkages between Pakistan and India,
especially trade through third parties.
But
precisely for the reason of the inevitability of trade, and leaving aside the
issues of war and peace, it should be clear that sleeping with the enemy is not
all that bad. If something is going to happen, it should rather happen in an
environment of peace than war. Equally, however, there’s a need to look at
certain assumptions, especially the more optimistic “give trade a chance to
bring peace” chants, with a more critical eye than the effusive, liberal enclave
of Pakistan is prepared to do.
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