THE EFFECTS AND DETERMINANTS OF COERCIVE ECONOMIC STATECRAFT, COMMODITY CERTIFICATION PROGRAMS, AND SANCTIONS

In the first chapter of this dissertation, I consider a recent program crafted in the United States that was designed to undermine violent groups operating in the Democratic Republic of the Congo (DRC). By requiring companies to account for the sources of minerals that could be linked to violent conflict, the effort was an attempt to balance between the adverse impacts of using economic leverage against violent targets abroad and the effectiveness of regulations. The US Congress’s stated ambition was to constrain commerce that supported violence in the DRC, while allowing legitimate production of the regulated minerals to continue. Many observers were skeptical that such a balance could be achieved, and claimed that the rules were a de facto ban on mineral exports from the DRC. I show however that market responses to changes in legislation were not consistent with the view that the US banned the use of regulated minerals from the DRC completely. Because the returns for companies in the US remained responsive to rules issued by the DRC’s Minister of Mines, it is more likely the case that investors expected at least some trade in the regulated minerals to continue. In the second chapter, I focus on regulations and important events relating to the global diamond industry. I investigate the importance of the Kimberley Process Certification Scheme (KPCS) especially, because the organization regulates diamond production and trade in many countries. That industry actors participated in the development of the KPCS caused considerable controversy however, and many critics of the KPCS claimed that it did not go far enough to undermine violence in diamond producing countries. The results I present in the second chapter support the point of view that regulations and events relating to the KPCS had (and may continue to have) a significant impact on diamond markets, but also call into question common descriptions of the diamond industry, and the industry’s relationship to the KPCS. Although it is often argued in the literature that the creation of the KPCS benefited large diamond mining companies, I show that reactions in financial markets were inconsistent with this point of view. I also provide evidence of an important nuance in the relationship between regulations and the diamond industry. Retail companies, including large-scale jewelry companies, experienced abnormally high returns coinciding with events that supported the credibility of the KPCS, while they experienced abnormally low returns for events that called that credibility into question. This suggests that the companies that benefit from the credibility brought by the KPCS are mostly in the retail side of the business, and that such companies have incentives for the Process to at least appear effective in its mission. In the final chapter I analyze factors that predict a country using or threatening to use sanctions against another country. I focus on the extent to which variation in the economic leverage one country has over another leaves a pair of countries more, or less likely to use sanctions. In that framework, I consider several questions that have been posed in the recent literature, and identify a number of characteristics of sending and receiving countries that are strongly predictive of sanction use. I show that countries with large national economies dominate among those that use and threaten to use sanctions, and that smaller economies rarely initiate sanctions against others. The results also show that countries that are poorer are more often targeted with sanctions, and that an ongoing conflict in either a sending or a target country predicts sanction use. The last chapter also shows that many indicators of economic vulnerability, and particularly issues of trade concentration and diversity, play a crucial role in the decision to initiate or refrain from using sanctions. These three chapters taken together provide an empirical investigation into the effects and determinants of sanctions and other forms of coercive economic statecraft. The results contribute to the ongoing discussion over how best to understand economic sanctions and similar programs in the current policy environment.