Coercive Trade Policy

Vincent Anesi and Giovanni Facchini

No 376, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: Empirical evidence suggests trade coercion exercised unilaterally is significantly less likely to induce concessions than coercion exercised through an international organization. In this paper we build a two-country model of coercion that can provide a rationale for this finding, and for how "weak" international institutions might be effective, even if their rulings cannot be directly enforced. In particular we show that if coercion is unilateral, the country requesting the policy change will demand a concession so substantial to make it unacceptable to its partner, and a trade war will ensue. If the parties can instead commit to an international organization (IO), compliance is more likely, because the potential IO ruling places a cap on the Foreign government's incentives to signal its resolve.

Keywords: GATT; WTO; Dispute Settlement; Political Economy (search for similar items in EconPapers)
JEL-codes: F12 F16 L11 (search for similar items in EconPapers)
Pages: 36
New Economics Papers: this item is included in nep-int and nep-pol
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https://www.dagliano.unimi.it/media/WP2014_376.pdf (application/pdf)

Related works:
Journal Article: Coercive Trade Policy (2019)
Working Paper: Coercive Trade Policy (2015)
Working Paper: Coercive Trade Policy (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:376

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