Interdependence here refers to a particular kind of international relationship that emerges when countries are linked by interactions that can be both costly and beneficial. (Gasiorowski, 1986) Under different circumstance, it can be both peace-fostering and conflict-fostering. Its influence would change as time goes on. During the Cold War, it had little influence, but after the disintegration of the Soviet Union, interdependence has been essential. Notably, interdependence should be separated from interconnectedness, where countries are joined by interactions that do not involve significant costs. (Keohane and Nye, 1977: 9) There are two perspectives to examine interdependence. First, Liberalism focuses on the absolute gains from trade, contending that the gains from trade give states a strong incentive to even avoid war when they have unit-level predispositions to favor it. The higher the level of interdependence, the more “restraints” on militarized conflict since it will hurt both sides’ interests. (Rosecrance, 1986). Conversely, Realism focuses on the relative gains and the costs of severed trade. If the level of economic interdependence is low, it has little influence on the decision-making process. However, if the level is high, which means that a state will be vulnerable to another, conflict is likely to break out. (Mearsheimer, 2001) There are two main points in this part. First, inequality can be generated by asymmetric economic interdependence “where one state in a dyad is more dependent than the other” (Copeland, 1996); therefore, “states with a different degree of dependence are most likely to engage in disputes” (Barbieri, 1996). Second, vulnerability occurs if countries can be irreparably harmed by dissolving their relationships with one another. If the bond between them is severed, the loss will be significant. (Wooten, 2007)

States also take the expectations for future trade into consideration. (Copeland,1996) Actually, Liberalism and Realism focus on different situations and are not contradictory, so they should be combined with the trade expectation theory. If the trade expectation between states is high in the foreseeable future, states prefer to continue trading with each other. In other words, the liberalist explanation is reasonable. The Realist perspective is convincing when trade expectation is low because states might resort to war to maximum its gains. Interdependence can thus foster both peace and war, depending on the specific condition. (Copeland, 1996) For example, Japan was heavily dependent on the U.S. before the Second World War. Although eighty percent of Japan's oil was imported from the U.S., Japan still initiated the Pacific War when U.S. warned Japan not to invade European colonies, which reduced the expectation for future trade. This shows that vulnerability and low expectations of trade might trigger MID or even great wars. However, the situations in which interdependence might relate to peace are examined in the next part.

Three time periods are examined here. First, during the Cold War, there was hardly any interdependence between NATO and the Warsaw Pact because of the tense relationship. We thus can hardly attribute the peace during the Cold War to economic interdependence. Under this circumstance, nuclear weapon is more important than the negligible economic interdependence. For example, the Korean War and the Vietnam War are actually great regional wars. The reason why it did not become a global war (by escalation) probably is that both the U.S. and the U.S.S.R. were more worried about nuclear war than the damage caused by interdependence. In terms of the peace-generator inside the alliance, we should consider whether the major factor is interdependence or simply having the same rival, because the Soviet Union was a huge threat for the westerners. It is hard to distinguish which one is more influential. After the U.S.S.R. disintegrated, until 2010 or so, the world was definitely in a unipolar structure. During this time, economic interdependence was promoted by many factors, which led to little MIDs. China, for example, has been developing fast because of reform and opening since 1978. Considering that trade brings a huge amount of profits, initiating a global war is undesirable. However, according to Offensive Realism, great powers always think twice before trading with other great powers. (Mearsheimer, 2001) This occurs frequently and is influential after 2008. Because China has been a threat to the unipolar status of the U.S., it has taken actions to hinder China’s development. However, though the bilateral trade expectations have been decreasing after that, great MID never occurred. This can be explained by its being bilaterally beneficial and increased interdependence. Moreover, maybe trade provides a peaceful way for the great powers to sort out their problems, rather than initiating wars, but in order to prove this theory, further research is needed.

In short, there is no consistent situation in economic interdependence. While economic interdependence wasn’t really important during the Cold War, it has been promoting peace after 1991.

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Reference:

1. Copeland, Dale C. "Economic Interdependence and War: A Theory of Trade Expectations." International Security, vol. 20 no. 4, 1996, p. 5-41.
2. Barbieri, K. (1996). Economic Interdependence: A Path to Peace or a Source of Interstate Conflict? Journal of Peace Research, 33(1), 29–49.
3. Rosecrance, Richard, 1986. The Rise of the Trading State: Commerce and Conquest in the Modern World. New York: Basic Books.
4. Gasiorowski, Mark J. “Economic Interdependence and International Conflict: Some Cross-National Evidence.” International Studies Quarterly, vol. 30, no. 1, 1986, pp. 23–38.
5. Mearsheimer, John J. The tragedy of great power politics. WW Norton & Company, 2001.