The Effectiveness of Sanctions Revisited: an Empirical Analysis Using a Bargaining and Enforcement Framework
Total Page:16
File Type:pdf, Size:1020Kb
THE EFFECTIVENESS OF SANCTIONS REVISITED: AN EMPIRICAL ANALYSIS USING A BARGAINING AND ENFORCEMENT FRAMEWORK Bo Ram Kwon A dissertation submitted to the faculty of the University of North Carolina at Chapel Hill in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Department of Political Science. Chapel Hill, NC 2013 Approved by: Navin A. Bapat Mark J. C. Crescenzi Layna Mosley Tom Carsey Lars Schoultz 2013 Bo Ram Kwon ALL RIGHTS RESERVED ii ABSTRACT BO RAM KWON: The Effectiveness of Economic Sanctions Revisited: An Empirical Analysis Using a Bargaining and Enforcement Framework (Under the direction of Navin A. Bapat) While extant research on economic sanctions have identified various state-level variables that affect the effectiveness of economic sanctions, this study examines sanctions success by incorporating the role of the firm. I argue that imposing sanctions creates an enforcement dilemma for sanctioning states or senders. Namely, unlike the decision to impose sanctions, senders often have disincentives to enforce their sanctions policies on their firms, given that the restriction on economic transactions with targeted states may undermine their competitiveness. Following a strategic bargaining framework that consists of a sender, its firm and a target state, I propose that sanctions are more likely to succeed when the sender's firm retains a moderate share of the target's market relative to its foreign competitors. Also, I argue that due to strategic interaction, sanctions are more likely to be imposed when the conditions do not favor their success. The detailed case illustration and large-N quantitative analysis support these predictions and suggest that sanctions enforcement is indeed critical in determining sanctions success. iii Dedicated to my parents and my husband, for their unwaning support. iv Acknowledgements This work would not have been possible without the support and guidance of several important people. I would like to thank Mark Crescenzi, Layna Mosley, Tom Carsey and Lars Schoultz for their thoughtful comments. I would especially like to thank my advisor, Navin Bapat, who first introduced me to the topic of economic sanctions and has offered constructive criticism and much patience in completing this project. I am also greatly indebted to my dear parents, Dr. Young Bong Kwon and Kye Sook Lee, for encouraging me to walk down this academic path. I extend special thanks to my husband, Jae Hyuk Chung, for being such a strong and understanding partner. Lastly, I am grateful to my beautiful son, Ian Minseok Chung, who was born one week before the dissertation defense and has made the last part of this journey infinitely more enjoyable. v Table of Contents List of Figures ...................................................................................................................................... vii List of Tables ....................................................................................................................................... viii Chapter 1. Introduction........................................................................................................................... 1 Chapter 2. Literature Review ............................................................................................................... 18 Chapter 3. A Bargaining Theory of Sanctions Imposition and Enforcement ....................................... 32 Chapter 4. A Case Illustration of U.S. Sanctions Against China ......................................................... 67 Chapter 5. A Quantitative Analysis of Sanctions Success ................................................................. 145 Chapter 6. Conclusion ........................................................................................................................ 184 References .......................................................................................................................................... 190 vi List of Figures Figure 1.1: Number of Economic Sanctions Imposed ............................................................................ 3 Figure 4.1: China’s International Defense-Industrial Organizations .................................................... 78 Figure 4.2: Number of Commercial Satellite Launches: 1998-2002 .................................................. 110 Figure 4.3: U.S. Communications Satellite Exports to China: 1989-2005 ......................................... 111 Figure 4.4: Global Satellite Industry Revenue by Sector ................................................................... 117 Figure 4.5: U.S. Market Share in the Satellite Manufacturing Sector ................................................ 118 Figure 4.6: U.S. vs. Non-U.S. Manufacturing Revenue ..................................................................... 119 Figure 4.7: Manufacturing Market Share by Region 2002 ................................................................. 119 Figure 4.8: Market Share of Major Global Automakers .................................................................... 135 Figure 4.9: Market Share of the Top 3 Business Groups 2002 .......................................................... 138 Figure 4.10: SAIC-GM and SAIC-VW Passenger Car Sales, 1990-2002 ......................................... 142 Figure 5.1: Predicted Probabilities of Sanctions Success by Sender’s Market Share ........................ 164 Figure 5.2: Predicted Probabilities of Sanctions Success by Target’s Total Trade ............................ 165 Figure 5.3: Predicted Probabilities of Sanctions Success by Multilateral Sanctions with Institutional Support ................................................................................................. 167 Figure 5.4: Predicted Probabilities of Imposition by Sender’s Market Share .................................... 169 Figure 5.5: Predicted Probabilities of Imposition by Target’s Total Trade ........................................ 171 Figure 5.6: Predicted Probabilities of Success by Real Competition ................................................. 177 Figure 5.7: Predicted Probabilities of Success by Target’s Total Trade ............................................ 178 Figure 5.8: Predicted Probabilities of Success by Multilateral Sanctions with Institutional Support ................................................................................................. 178 Figure 5.9: Predicted Probabilities of Imposition by Real Competition ............................................ 180 Figure 5.10: Predicted Probabilities of Imposition by Target’s Total Trade ...................................... 180 vii List of Tables Table 3.1: The Determinants of Sanctions Success .............................................................................. 56 Table 3.2: Summary of Hypotheses ..................................................................................................... 66 Table 4.1: Sanctions Targeting Chinese Firms for Weapons Proliferation .......................................... 80 Table 4.2: Chinese Law Governing Domestic vs. Foreign Technology Transfers .............................. 82 Table 4.3: The Provisional Regulations on Guiding the Direction of Foreign Investment .................. 83 Table 4.4: U.S. Sanctions related to Satellite Exports to China ........................................................... 87 Table 4.5: Presidential Waivers of Sanctions for Exports of Satellites or Parts to China .................... 94 Table 4.6: Satellite Manufacturing Firms and Chinese Launch Projects ........................................... 114 Table 4.7: Composition of the Satellite Industry ................................................................................ 116 Table 4.8: Requirements for Establishing Auto Manufacturing Joint Ventures in China .................. 124 Table 4.9: U.S. Defense Trade Controls: Embargo Reference Chart ................................................. 125 Table 4.10: The Development of Joint Ventures in China’s Auto Industry ....................................... 130 Table 4.11: Joint Ventures in China’s Auto Industry 2002 ................................................................ 131 Table 4.12: Major Passenger Car Models 2003 ................................................................................. 136 Table 4.13: Top 3 Business Groups in the Chinese Auto Sector 2003............................................... 139 Table 4.14: Chinese Automotive Business Groups ............................................................................ 140 Table 5.1: Summary of Hypotheses ................................................................................................... 150 Table 5.2: Variables, Operationalization and Predictions .................................................................. 157 Table 5.3: Summary Statistics ............................................................................................................ 158 Table 5.4: Key Variable and Full Model ............................................................................................ 160 Table 5.5: Separate Probit Models ..................................................................................................... 161 Table 5.6: Full Model with Alternative Substitutability Measure ...................................................... 162 Table 5.7: Summary Statistics ...........................................................................................................