Naval Power, Merchant Fleets, and the Impact of Conflict on Trade

Abstract Although commonly assumed to secure trade, the influence of both naval power and merchant fleets on combatants’ ability to secure trade has been rarely explored. Using the gravity model on a dataset spanning 1980–2011, this study shows that the damage conflict inflicts on states’ third-party trade declines as both their naval power and commercial fleet size increase. Beyond validating core assumptions of modern maritime strategy, our results make a valuable contribution to the extensive literature on trade and conflict. The notion that trade integration fosters peace rests on the assumption that conflict depresses third-party trade, thereby reducing trade-integrated states’ propensity to initiate conflict. As this study shows, however, naval power and merchant fleets mitigate these trade-related costs of conflict. Thus, the ability of trade to deter conflict declines when states possess substantial maritime capabilities.