Coercive trade policy

Anesi, Vincent; Facchini, Giovanni

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.

Citation

Anesi, V., & Facchini, G. (2019). Coercive trade policy. American Economic Journal: Microeconomics, 11(3), 225-256. https://doi.org/10.1257/mic.20170085

• Journal Article Type: Article
• Acceptance Date: Sep 21, 2018
• Online Publication Date: Aug 1, 2019
• Publication Date: Aug 1, 2019
• Deposit Date: Oct 3, 2018
• Publicly Available Date: Oct 3, 2018
• 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
• DOI: https://doi.org/10.1257/mic.20170085
• Keywords: GATT; WTO; Dispute Settlement; Political Economy
• Public URL: https://nottingham-repository.worktribe.com/output/1144442
• Publisher URL: https://www.aeaweb.org/articles?id=10.1257/mic.20170085&&from=f
• Contract Date: Oct 3, 2018