The Interdependence of US Troop Deployments and Trade in the Developing World

The relationship between political conflict and trade has contributed to a riveting discussion in international relations about whether trade produces conflict, or whether conflict itself reduces trade. Most studies proxy "the flag" using militarized interstate disputes (MIDs). However, extensions of "the flag" might well obtain in environments short of MIDs. A more general way to proxy the flag is troop deployments. The deployment of military troops is an essential element of foreign policy. Using panel data for 126 developing countries from 1965 to 2002 and a two-stage least square approach, this essay investigates the relationship between trade and United States troop deployments. We find that trade and troops have a nonrecursive relationship: trade follows the flag and troops follow trade. Given the increased insecurity in the world today, the results are timely and reinforce previous research about the reciprocal relationship between the flag and trade.