The Economic Coercion Trilemma and the Paradox of Self-Defeating Success
Abstract: States blessed with strong economies often leverage their position for political gain using conditionality: they withhold market access from any state that does not embrace specific policies. Programs of conditionality are staggeringly diverse, varying the types of issues tied to market access, the amount of market access connected to each issue, and the degree of compliance required for access. What factors limit the number and types of political issues that can be linked to market access? Using a formal model I show how the design of conditionality is constrained by an underlying economic coercion trilemma. Programs of economic coercion can achieve at most two of the following three objectives: 1) a broad coalition of support for conditionality from multiple interest groups whose issues are linked to trade, 2) the maximum trade value possible being tied to each issue, and 3) consistent enforcement across issues. I show that states will benefit from tying multiple political issues to a single commercial volume when simultaneous noncompliance on multiple issues is unlikely. I also show how the optimal program design varies with the degree of dependence on trade. Finally, I describe how the trilemma is applied to historical and modern examples of economic coercion.