PTA Negotiations, Institutional Design, and Uncertainty

• In Event: Trade Agreements, Negotiations, and Institutional Design (Pre-Recorded)

Abstract

Preferential Trade Agreements (PTAs) have become a fixture of the global trading system. Nearly every country is a member to at least one of these arrangements, whose purpose is to ease barriers to trade between member countries. Yet, PTAs differ widely in their size, scope, and complexity. Each of these agreements, moreover, were born out of negotiations over the size, scope, and complexity of the arrangement. Despite a widespread recognition of the importance of PTAs and variations in their design, few studies have examined the dynamics of the negotiations that brought these agreements to fruition. We propose a theory of PTA negotiations that focuses on two key factors: the proposed depth of the arrangement and the presence of an escape clause. We argue the latter should lessen the costs of the former. Deep PTAs which propose flexibility will be more acceptable to states than deep PTAs that are rigid. Shallow PTAs with flexibility will be less acceptable: flexibility serves as a signal of bad faith to those considering shallow agreements. Our empirical analyses of negotiations of several hundred PTAs provide support for our theory, even when controlling for a number of potential confounding variables.

Authors

• Edward D. Mansfield, University of Pennsylvania

• Helen V. Milner, Princeton University

• Jon C. W. Pevehouse, University of Wisconsin, Madison