The causal nexus between trust, institutions and cooperation in international relations

The aim of this paper is to dissect the causal nexus between trust, institutions and cooperation in international relations (IR) and to highlight the theoretical and empirical potential of bringing trust from the periphery to the centre of our debates about international cooperation. My central argument is that the concept of trust allows us to explain particularly risky forms of international cooperation where the costs of being exploited outweigh the potential gains of cooperation, actors have an incentive to defect if others cooperate, and uncertainty about others' preferences and constraints cannot be fully reduced by international institutions. As most institutions in IR remain incomplete, scholars of international cooperation should hence pay more attention to trust-based forms of risk absorption. Moreover, the paper argues that the creation of trust is best conceptualised as a process of costly signalling. In order to test the causal link between trust and cooperation, the paper analyses Germany's consent to give up the Deutschmark and to create a common European currency in 1989. Germany's initial mistrust regarding France's trustworthiness in monetary affairs could be overcome by the exchange of costly signals. I show that the creation of trust was a necessary part of a causal mechanism bridging the analytical gap between Germany's general preferences for monetary cooperation and the actual creation of European Monetary Union under conditions of risk and uncertainty.