Economic Deterrence and the Design of Anti-Coercion Instruments

Governments are building a new class of instruments designed to deter economic coercion ex ante, justifying them in the vocabulary of deterrence theory. Whether that vocabulary transfers, however, is contested and untested, as few studies have specified what deterrence requires of an economic instrument’s design. We develop a framework for assessing economic deterrence by translating deterrence theory’s three C’s of capability, credibility, and communication from the military to the economic domain, and derive nine design requirements for anti-coercion instruments. Because this class of instruments seeks to deter coercion ex ante by threatening ex-post punishment, they are best understood as operating according to a deterrence-by-punishment logic. We further argue that the translation of deterrence-by-punishment to the economic field presupposes the capacity to absorb and distribute the costs of self-inflicted harm as the pivotal condition on which the credibility of this kind of deterrence rests. We probe this claim through a congruence analysis of the EU’s Anti-Coercion Instrument, a least likely case of economic deterrence because of the EU’s institutional and political shortcomings. Our analysis shows that the instrument performs strongly on communication and considerably less well on capability and credibility, lacking above all an institutionalized burden-sharing mechanism. It is best understood as a conditional deterrent, whose potential depends on political conditions its design leaves unresolved. Economic deterrence, our analysis shows, is increasingly seen as vital by governments seeking to counter coercion. Its potential, however, depends on a proper translation of the lessons of deterrence theory from the military to the economic realm.