De-risking won't deliver big peace dividend

Trade policy is being sold as a security tool again. Cut risky dependencies, move supply chains, screen investment, and you get a safer world. But the new argument from CEPR economists is almost the mirror image — less trade may reduce coercion risk in one channel while making actual conflict more likely in another. That is the gap in the whole de-risking story. The news is that a fresh paper and VoxEU column on May 8 tried to put a number on it — and the number is big. ### What are they actually claiming? They are not saying dependence is harmless. They are saying the policy debate has become too one-sided. Governments talk about how trade can be weaponized, but they spend less time on the older idea that trade also makes war more expensive and therefore less attractive. In their framing, de-risking is a real tradeoff — more resilience in some supply chains, but less of the commercial glue that can restrain states from escalating. (cepr.org) ### Why is “peace dividend” the key phrase? Because the whole point is that trade may buy peace, not just growth. The authors’ headline estimate says a doubling of bilateral trade reduces the probability of militarized conflict by about 30%. That is not a tiny side effect. It implies the economic upside of de-risking cannot be judged only by factory relocation, inventory buffers, or export-control leverage. You also have to count what gets lost when countries become less economically entangled. (cepr.org) ### How did they try to prove that? This is the clever part. Trade and peace usually move together, but that does not prove one causes the other. Peaceful countries may just trade more. The paper tries to break that loop by using changes in aviation technology in the late 20th century. Some country pairs got much shorter effective routes by air than by sea, so they experienced bigger trade gains for geographic reasons that were not simply politics. The authors use that variation as the causal lever. (cepr.org) ### Why does that matter for de-risking now? Because de-risking is no longer a slogan on the margins. It is embedded in export controls, investment screening, industrial policy, and supply-chain redesign across the U.S., Europe, and parts of Asia. The IMF has been warning for a while that policy-driven geoeconomic fragmentation can drag on trade, capital flows, technology diffusion, and global public goods. So even before you get to the peace argument, the economic bill was already rising. (cepr.org) ### But isn’t some de-risking still rational? Yes — basically everyone agrees that concentrated dependence in semiconductors, energy, pharma inputs, or defense-adjacent tech can be dangerous. The catch is that “some” easily turns into “a lot,” especially when politics rewards visible separation more than quiet interdependence. De-risking can feel like buying insurance. But if the premium is permanently higher costs plus weaker deterrence through commerce, the insurance may be overpriced. (imf.org) That last step is an inference from the paper, not a direct quote. ### Are markets acting like fragmentation is fading? Not really. BlackRock’s geopolitical risk dashboard says market attention to geopolitical risk is down from the 2022 peak but still elevated, with Russia-NATO tensions and U.S.-China competition still central. In other words, the world is not moving into a clean post-crisis phase where supply-chain rewiring suddenly delivers a big peace payoff. The background remains fragmented and tense. (cepr.org) ### So what is the real takeaway? De-risking may still be necessary in narrow, strategic places. But the idea that it will also hand countries a large peace dividend looks shaky. The newer research points the other way — trade itself may be one of the few mechanisms that quietly lowers conflict risk. So leaders are probably choosing between different kinds of vulnerability, not escaping vulnerability altogether. (cepr.org) (blackrock.com)