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.
Anesi, Vincent, and Giovanni Facchini.
"Coercive Trade Policy."
American Economic Journal: Microeconomics,
Conflict; Conflict Resolution; Alliances; Revolutions
Asymmetric and Private Information; Mechanism Design
Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
International Agreements and Observance; International Organizations