How Commerce Becomes Compromised: Coercion and Credibility in the Age of the Global Economy

Abstract

Deeper economic linkages to a wider variety of states mean that opportunities for economic coercion are proliferating even while creating aggregate wealth. Under what circumstances does a mutually beneficial economic relationship transform into a political vulnerability? Using commerce as a political bargaining chip requires the state to convince others that it will follow through on threats to interrupt market access. The three papers of this dissertation explain how this credibility constraint determines the scope, prevalence, and effectiveness of economic coercion. My first paper considers how economic coercion is designed. If the state requires simultaneous compliance in multiple issue areas before granting market access, it maximizes incentives to comply but also makes them brittle –- any targeted states that cannot comply in one issue area have no incentive to comply in any. I demonstrate that this tradeoff is one example of a more general economic coercion trilemma. Characteristics of the program’s domestic constituency, of the issues themselves, and of the international economy are key determinants of how the state positions itself within the trilemma. My second paper argues that states can improve the credibility of both threats to punish noncompliance and assurances that compliance will be rewarded by carefully selecting coalition partners. Choosing partners with different interests can create an mechanism that holds the state accountable. In an application to the Iran deal negotiation, I find that Congressional resolve to maintain sanctions initially stymied progress, but the United States was ultimately able to increase the believability of its commitments by partnering with European states that were more open to removing sanctions. My third and final paper studies credibility and the effectiveness of economic coercion in an empirical setting. The paper overcomes the difficulties of strategic selection by applying a new conceptual approach and shows that beneficiaries of the Generalized System of Preferences, a program of tariff exemptions, change policy to reduce the risk of being threatened with expulsion from the program.