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Coercive trade policy

Anesi, Vincent; Facchini, Giovanni

Authors

Vincent Anesi



Abstract

Coercion is used by one government (the sender") to influence the trade practices of another (the target"). We build a two-country trade model in which coercion can be exercised unilaterally or channeled through a “weak" international organization without enforcement powers. We show that unilateral coercion may be ineffective, because signaling incentives lead the sender to demand a concession so substantial to make it unacceptable to the target. If the sender can instead commit to the international organization's dispute settlement mechanism, then compliance is more likely, because the latter places a cap on the sender's incentives to signal its resolve.

Journal Article Type Article
Publication Date Aug 1, 2019
Journal American Economic Journal: Microeconomics
Print ISSN 1945-7669
Electronic ISSN 1945-7685
Publisher American Economic Association
Peer Reviewed Peer Reviewed
Volume 11
Issue 3
Pages 225-256
APA6 Citation Anesi, V., & Facchini, G. (2019). Coercive trade policy. American Economic Journal: Microeconomics, 11(3), 225-256. https://doi.org/10.1257/mic.20170085
DOI https://doi.org/10.1257/mic.20170085
Keywords GATT; WTO; Dispute Settlement; Political Economy
Publisher URL https://www.aeaweb.org/articles?id=10.1257/mic.20170085&&from=f

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