Coercive Trade Policy

Giovanni Facchini and Vincent Anesi

No 10687, CEPR Discussion Papers from Centre for Economic Policy Research

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: Dispute settlement; Gatt; Political economy; Wto (search for similar items in EconPapers)
JEL-codes: F12 F16 L11 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-int and nep-pol
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Related works:
Journal Article: Coercive Trade Policy (2019)
Working Paper: Coercive Trade Policy (2014)
Working Paper: Coercive Trade Policy
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