Complex global value chains and economic interdependence: a new look at the opportunity costs argument

Under what conditions does economic interdependence increase or decrease state security? This article contributes to the scholarly debate on economic interdependence by examining the role of complex global value chains (GVCs) in deterring militarized conflict. It argues that GVC trade should be a far stronger deterrent to escalating conflict than other forms of trade, due to the importance of upstream inputs of strategic goods, which cannot be appropriated after conquest. Thus, the global fragmentation of production can have unintended positive spillovers for global peace. The article tests the importance of GVCs as opposed to regular trade flows for global peace by providing a qualitative comparative analysis (QCA) of all international crisis moments and their escalation. The causal mechanism is further illustrated with a qualitative case study of the global semiconductor supply chain and its role in relations between Taipei, Beijing, and Washington. Our theory and empirics suggest that GVCs on the whole are pacifying and that reshoring can have unintentional negative consequences for global peace.