How effective is trade conditionality? Economic coercion in the Generalized System of Preferences

Abstract

States often receive threats of economic coercion only after committing some transgression. While attention has been given to strategic selection in the imposition of sanctions – the notion that sanctions are imposed only after the threat of sanctions has failed to elicit compliance – selection also occurs at the threat stage. Does the possibility of economic coercion incentivize states to stay in line before they are directly threatened? This article makes two contributions. First, it presents a theory showing how the interaction between different types of threats can alter the strategic context of economic coercion in ways that potentially reverse the results of empirical analysis. It explains that states are likely to issue general threats, or threats targeting the behavior of a group of countries, when sanctions effectiveness is unknown or the identity of noncompliers is difficult to predict. Second, using quasi-experimental techniques, this article demonstrates that states actively manage the risk of losing access to a trade preference program by altering their policies. The article indicates the political consequences of economic linkages may be more extensive than previously believed.