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This paper examines the timing behind the decision of countries to enter into regional trade agreements or interstate military conflicts, considering these two potential actions as substitute strategies. Using bilateral data from 1950 to 2014, I employ survival analysis to examine the factors that determine the likelihood of two countries entering into a regional trade agreement or a military conflict at any point in time. Historical or recent wars are posited to raise the gains from trade and therefore increase the likelihood that two countries choose to join the same trade agreement. On the other side, the existence of a strong trade relationship may raise the opportunity cost of entering into a conflict; bilateral trade flows and common membership in a regional trade agreement are posited to impact the likelihood of conflict. Other explanatory variables that affect the likelihood of either a common trade agreement or a military conflict include economic size, measured as the product of and the difference in the two countries’ GDPs; level of development, measured as the product of and the difference in the two countries’ per-capita GDPs; geography, measured by distance, contiguity, landlocked status, and island status; institutional linkages, represented by a common language, a colonial relationship, or a common legal origin; and political variables, including WTO membership, democracy, military alliances, and being a major oil producer. Results show that economic, geographic, institutional, and political variables all influence the probability that two countries enter into a conflict or join the same regional trade agreement.

Conflict or Cooperation: A Survival Analysis of the Relationship between Regional Trade Agreements and Military Conflict