Some of the most exciting recent works in the international political economy (IPE) literature on trade have been studies that problematize the political implications of intraindustry trade. While still in its infancy, this literature highlights a major problem in IPE scholarship: Political scientists continue to base their models of trade politics on outdated models of international trade. In the postwar period, the nature of trade between developed countries, in particular, changed dramatically. Rather than trade based only on comparative advantage and factor endowments (interindustry trade), states also began importing different varieties of the same types of manufactured goods that they exported. The World Bank calls intraindustry trade “perhaps the most important economic development since World War II” (World Development Report 2009), yet one would never know this from reading the vast majority of the IPE literature on trade.

Most of the recent work on the politics of intraindustry trade focuses on domestic political competition, which is why Cameron Thies and Timothy Peterson’s book is such an important contribution. Intra-Industry Trade is the first book-length study to consider the effects of this important shift in the nature of trade on international politics. IPE scholars have long examined the relationship between trade and international relations, yet they have rarely considered the fact that the composition of trade (inter- versus intraindustry) may affect politics in radically different ways. Thies and Peterson take as their starting point the seminal peace through trade hypothesis. They observe that trade may be a powerful force for peace and cooperation today, but this was not the case historically. They argue that the “the peaceful parts of trade are the intra-industry portions” (p. 160).

The logic of their argument is that the composition of trade affects domestic interests in liberalization versus protection, and it also changes the security calculus involved in states’ decisions to liberalize. Consistent with most other IPE work on intraindustry trade, the authors argue that such trade reduces producer demands for protection. Eager to capture increasing returns to scale and access foreign markets, producers accept increased domestic competition when they produce specialized varieties of branded products, as opposed to undifferentiated commodities that are easily substituted for cheaper foreign imports. With mutual and complementary domestic interests in intraindustry trade, states are more likely to maintain cooperative relations. In terms of security, the authors argue that interindustry trade can actually reduce security, as it increases asymmetric dependence on trade partners for vital commodities. Contrastingly, intraindustry trade raises the likelihood of peace and cooperation between two states because neither state becomes dependent upon the other for goods that it does not also produce domestically. Producers and consumers in both states have an interest in maintaining cooperative relations that maximize exchange, profits, and product variety. Finally, the authors argue that importing branded goods could increase “cultural understanding” (p. 22) between consumers in trading states, enhancing the Kantian mechanism of peace through cosmopolitanism.

Thies and Peterson propose four empirical implications of this theory. Chapter 3 finds strong support for the hypothesis that when a greater proportion of trade between two states is intraindustry, they are more likely to form a preferential trade agreement. Chapter 4 finds that countries in a dyad with a higher proportion of intraindustry trade will be less likely to initiate trade disputes with each other via World Trade Organization dispute-settlement mechanisms. This is an interesting and important result given that as trade volumes increase within a dyad, trade disputes are more likely. Yet intraindustry trade has a countervailing effect: As intraindustry trade increases as a proportion of total trade, trade disputes become less likely even as overall trade volume increases.

The final section of the book turns to the effects of intraindustry trade on security outcomes. In Chapter 5, the authors show that two states are less likely to initiate military conflicts with each other as intraindustry trade increases between them. Chapter 6 finds that intraindustry trade leads to increased political affinity between states. The authors’ analyses demonstrate that dyadic states with higher intraindustry trade have more similar voting records in the United Nations and a higher probability of alliance formation and prevalence than do states whose trade is primarily interindustry.

The book’s empirical strategy is statistical analysis using dyadic-level data. The empirical chapters read as a series of quantitative journal articles, with thorough discussion of methods and results. The methodology is very sophisticated, although the exclusive use of statistical analyses leaves the proposed causal mechanisms largely abstract. Discussion of real-world cases would greatly help to illustrate the processes that the authors describe. At the same time, the compelling evidence demonstrating strong associations between intraindustry trade and a range of international political outcomes is a novel and important contribution, laying the groundwork for future research into the precise nature of the processes at work.

Another strength of the book is in the way it engages leading explanations typically provided for cooperation or conflict in the global economy, including democracy, development, geographic proximity, and trade openness. The findings are convincing because they demonstrate the independent effects of intraindustry trade even when controlling for these other important factors, and the authors theorize as well as test the complex ways that these factors may interact with intraindustry trade to produce a particular outcome. For example, development is only associated with peace when states engage in high levels of intraindustry trade as a proportion of their total trade. Additionally, and central to the authors’ argument, trade openness loses its pacifying effect when intraindustry trade is controlled.

The authors argue that another important contribution of the book lies in their operationalization and conceptualization of intraindustry trade. They make an argument for using trade data disaggregated to the product level in order to capture horizontal, though not vertical, intraindustry trade. The use of product-level data is standard for research on intraindustry trade, yet the way in which Thies and Peterson define horizontal and vertical intraindustry trade, and their theoretical rationale for excluding vertical intraindustry trade, is not. They argue that a product-level measurement of trade flows largely restricts the trade in the analysis to branded, consumer products, but this is not the case. Parts and machinery also fall under the 4-digit level of disaggregation that they employ. A large portion (if not the majority) of intraindustry trade, even between developed economies with similar factor endowments, is trade in intermediate goods used in the manufacture of finished products. Incorporating this trade into the authors’ arguments about the mutual producer interests in intraindustry trade seems straightforward and would only strengthen their arguments. As it stands, Thies and Peterson’s argument that trade in branded products increases cultural understanding between states and thus contributes to peace is the weakest part of their argument, and one that was not directly tested. Yet firms have an enormous interest in maintaining intraindustry trade, and those interests could have been further developed theoretically.

Intra-Industry Trade and the novel theory and rigorously tested implications that it presents is a major (and long overdue) contribution to the IPE literature on trade and international politics. It is about time that political scientists confronted the political implications of intraindustry trade and the shortcomings of our classic models, and Thies and Peterson’s excellent work in this area is a major step forward for the discipline.