Business·Analysis

Can crucial trade ties save the world from war? Putin's invasion has created doubters

Archeological records show humans have always traded with their neighbours. They have always fought wars. As Russia invades Ukraine and China sends missiles toward Taiwan, Canadian experts say economic interests could help stop the unthinkable.

A burst of sabre-rattling warns Canada to pull out the stops to put trade before war

Russian President Vladimir Putin, left, and Chinese President Xi Jinping meet at the Beijing Olympics in February. As Russia invaded Ukraine on Feb. 24 and China sent warplanes over the Taiwan Strait earlier this month, resolving the question of whether our economic best interests can save us from conflict may never have been so pertinent. (The Associated Press)

The Correlates of War sounds like it could be the title of a thriller from an airport bookstore.

But known by its somewhat undignified acronym, the COW project is actually a large collection of research on the history of wars and their causes.

And one of the much-debated issues the COW project is still struggling to resolve is over Trade-Peace Theory, the idea that close economic interdependence helps to discourage countries from going to war.

As Russian troops marched into Ukraine in February and China sent warplanes soaring over the Taiwan Strait earlier this month, resolving the question of whether our economic best interests can save us from conflict — or whether it is just a liberal Illusion, as one author suggested in the title of her book — may never have been so pertinent.

Human urge toward war

"We do as a species have a tendency to go to war," University of Ottawa anthropologist Scott Simon said in a phone interview last week. "From the beginning of our species, basically, we've had this tendency to either trade with other people or to go to war with them."

Simon quotes the French philosopher Raymond Aron that war is a particular kind of social arrangement.

In the era of enormously powerful nuclear weapons, it is a social arrangement where even the smallest conflict could result in millions of deaths.

The idea that a spat over the China-claimed Spratly Islands and over Taiwan would expand into a nuclear conflict was an interesting topic for the sci-fi book 2034: A Novel of the Next World War. It may seem unlikely in reality.

A mushroom cloud rises with ships below during a U.S. nuclear weapons test on Bikini Atoll, Marshall Islands, in 1946. A nuclear war is in nobody's economic interests. (U.S. Library of Congress/Reuters)

But that is exactly the subject of a nonfiction article in last week's Financial Times titled "America Must Consider the Risk a War Over Taiwan Could Go Nuclear."

"If the fast-gelling opinion of Washington's foreign policy elite is correct — that such a war is no longer simply possible but likely — then assessing such a risk needs to be at the forefront of every discussion," wrote Michael Auslin, a fellow at Stanford University's Hoover Institution.

Besides his anthropologist's views on humanity's propensity to war, Scott Simon has a second qualification for discussing a potential invasion of Taiwan by China: He's the co-holder of the Chair of Taiwan Studies at the University of Ottawa and has spent more than a decade on the democratic island that Beijing insists is a disloyal province of the People's Republic of China.

An expensive invasion

Despite — and perhaps partly because of — Vladimir Putin's attack on Ukraine, Simon is convinced a Chinese invasion is not imminent. Military experts say that with a reserve army of more that a million, missiles, aircraft and other defences solely directed at a potential Chinese offensive, a Ukraine-style incursion into Taiwan would be costly.

"The military capability is there to deter an invasion," Simon said.

But as he sketched out in an article last week for the Centre for International Policy Studies, Taiwan also remains an indispensable source of semiconductors — the chips used in everyday consumer goods and in many military applications, not just for the West but for China as well.

Taiwanese President Tsai Ing-wen, centre rear, visits soldiers at a military base in New Taipei City, in a photo released on Aug. 23. The democratic island has massive defences all aimed at preventing an attack from the mainland that would make an invasion costly. (Taiwan Presidential Office handout/Reuters)

Despite a planned surge of new investment as part of the CHIPS and Science Act that U.S. President Joe Biden signed into law by executive order last week, neither the United States nor China are yet prepared to go it alone in the globally integrated manufacture of microelectronics.

Jia Wang, interim director of the Edmonton-based China Institute at the University of Alberta, said that while Taiwanese microchips get most of the attention, a conflict as serious as an attempted invasion — or a blockade — of Taiwan would create a breakdown in  trade between China and North America that is worth hundreds of billions of dollars annually.

And as a small trading nation, Canada would be more affected than either the U.S. or China, which both have huge domestic markets.

Despite attempts by both sides to find or create alternative sources of essential goods and services, the Chinese and North American economies are complementary, she said, and a collapse in the exchange of food and raw materials on one side and cheap consumer goods dependent on mass labour on the other could devastate both economies.

According to a report last week in the Japanese business publication Nikkei Asia, a "Taiwan emergency" that led to Western sanctions on China could lead to the evaporation of $2.6 trillion from the global economy.

Dan Ciuriak, an economist and senior fellow at the Centre for International Governance Innovation, based in Waterloo, Ont., is a strong advocate for the idea that economic self-interest can prevent countries from going to war.

The Ground Force of the Eastern Theatre Command of China's People's Liberation Army conducts a long-range live-fire drill into the Taiwan Strait, from an undisclosed location in this photo provided by the army on August 4, 2022.
China conducts long-range live-fire drills into the Taiwan Strait from an undisclosed location in an undated photo released this month. (People's Liberation Army handout/Reuters)

Critics of the idea point to many contrary examples, most famously the First World War, when many assumed an economically integrated Europe would never throw it all away in years of deadly combat.

Some think of that war as an accident. Others point out the many differences from the current era, including the existence of nuclear warheads and the strategy of mutually assured destruction.

War's economic failure

Most recently, Putin's invasion of Ukraine seems to prove the case that an autocratic leader can make a fatal miscalculation, imagining an easy victory with political or economic benefits.

"The wild card is Xi," Ciuriak said, referring to Chinese President Xi Jinping, currently angling for a third term as the country's supreme leader. "You cannot exclude the possibility that he will do something incredibly stupid."

Like Simon, Ciuriak thinks that is unlikely and that with China already suffering the effects of a protracted pandemic, a domestic property collapse and a series of bad overseas loans, Xi will be guided by economic interests that will secure his people's access to foreign imports, including food, and to the sale of their exports overseas.

Of course in war, it takes two to tangle, and Ciuriak says it is important for Canada to try to defuse the potential conflict and help convince both sides of what seems obvious to him: that trade is better than war.

LISTEN | How Canada's trade relations with China move forward: 
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Canadians should remind China that its economy is growing by three Taiwans a year and that it would be a costly, wasted effort even to bother to crush the reluctant province militarily. The two are already becoming more integrated, sharing investment and technology.

It is also essential to convince China hawks in the U.S. that in what has become a multipolar world, the U.S. cannot expect to retain the economic and military dominance it had at the end of the Cold War.

Economic benefits of peace

To help avoid conflict, one lesson learned from Europe, cut off from crucial energy supplies, is to prepare ourselves so that Canada cannot suffer a similar fate.

"We just have to make sure that in areas where we would be liable to be held hostage ... we need to diversify our supply sourcing, make sure that we've either got it domestically or in a friendly country," Ciuriak said. That doesn't just apply to microchips.

With one-fifth of the world's population, it is reasonable that China will eventually represent about a fifth of the world's economy or maybe a bit more, he said. And as it grows, it will become an even more valuable trading partner for Canada and for the U.S.

Ciuriak insists that China is not going away and that Canadians must fight for the idea that it is better to keep trading with a country that may not be a fast friend than to lose our trade and the benefits of peace by engaging in a war with a certain enemy where everyone will lose.

Follow Don on Twitter @don_pittis

ABOUT THE AUTHOR

Don Pittis

Business columnist

Based in Toronto, Don Pittis is a business columnist and senior producer for CBC News. Previously, he was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London.

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