Promoting trade through private law: Explaining international legal harmonization

A large body of research examines states’ efforts to increase international trade through public law, that is, by forming preferential trade agreements (PTAs) that lower governmental barriers to trade. Scholars, however, have overlooked another mechanism through which states seek to facilitate trade: international harmonization of private law. Underlying legal harmonization is the assumption that cross-national variation of commercial law impedes trade; by contrast, similarity of laws across countries encourages trade by reducing uncertainty and transaction costs. I argue that the harmonization of private law acts as a substitute for the public-law channel of stimulating trade: countries with limited PTA partnerships make up for this deficiency by joining initiatives for private-law harmonization. This argument is tested by analyzing the UN Convention on Contracts for the International Sale of Goods-one of the primary instruments of legal harmonization. Indeed, countries that are party to shallow PTAs or have few PTA partners are more likely to ratify this private-law convention. Overall, this article urges scholars of trade and international law to broaden their research agenda to include private law.     

Multilateral determinants of regionalism revisited

The idea that some features of the multilateral trading system create incentives for countries to join preferential trade agreements (PTAs) is among the first and most influential explanations for the wave of regionalism in the last decades. Until recently, only a few empirical studies have explored this hypothesis and their results have been accepted by many researchers and policy-makers to be a fact. In this study we revisit the question of whether multilateral events are important determinants of regionalism. We use an extended dataset and implement several empirical specifications in the analysis. Unlike previous work, our results provide little support for the relevance of variables such as the number of GATT/WTO members, ongoing trade negotiation rounds, and trade disputes as predictors of PTA formation.     

The design of international trade agreements: Introducing a new dataset

Preferential trade agreements (PTAs) have been proliferating for the last twenty years. A large literature has studied various aspects of this phenomenon. Until recently, however, many large-N studies have paid only scant attention to variation across PTAs in terms of content and design. Our contribution to this literature is a new dataset on the design of trade agreements that is the most comprehensive in terms of both variables coded and agreements covered. We illustrate the dataset’s usefulness in re-visiting the questions if and to what extent PTAs impact trade flows. The analysis shows that on average PTAs increase trade flows, but that this effect is largely driven by deep agreements. In addition, we provide evidence that provisions that tackle behind-the-border regulation matter for trade flows. The dataset’s contribution is not limited to the PTA literature, however. Broader debates on topics such as institutional design and the legalization of international relations will also benefit from the novel data.     

Preferential Trade Agreements and Trade Expectations Theory

Studies find that members of preferential trade agreements (PTAs) are less likely to be involved in militarized conflict. An expectation of continuing amicable trade relations is among the factors linking PTAs to peace. However, this role of PTAs is difficult to test due to the problem of observational equivalence; PTAs correlate with trade levels and liberalization, factors also linked to peace. In this article, we isolate the impact of PTAs on trade expectations by distinguishing between signed agreements and those in force. A focus on signed but not-yet-in-force PTAs allows us to assess the correlation between agreements and peace before other pacifying, and therefore potentially confounding, elements emerge. Statistical tests spanning 1957 to 2000 demonstrate that signed PTAs are pacifying, while in-force agreements have no statistically significant impact when controlling for other factors linked to peace.     

The Politics of Preferential Trade Liberalization in Authoritarian Countries

While autocracies constitute a third of all signatories of preferential trade agreements (PTAs), very little research has explained why some autocrats join PTAs while others do not. We argue that this variation reflects the leader’s degree of vulnerability to elite-led coups during leadership change–whether a leader enters power legally or extralegally. New extralegal leaders are more vulnerable than new legal leaders, which encourages extralegal leaders to use PTAs to both build support from exporters and pressure disloyal importers. We test our hypotheses using a dyadic data set of 120 autocracies from 1960 to 2014. Our results show that extralegal leaders sign more and deeper PTAs than legal leaders. Moreover, we find that extralegal leaders with a high risk of coups are more likely to form deep PTAs than extralegal leaders with a low risk of coups. In line with our argument, we also provide evidence that extralegal leaders sign trade agreements that are likely to be enforced. Our article has implications for the political economy of trade and for development studies.     

The impact of preferential trade agreements on governmental repression revisited

Previous research suggests that most treaties are ineffective in ensuring countries’ compliance with human rights standards. It has been argued, however, that preferential trade agreements (PTAs) including ‘hard’ human rights standards can withhold economic benefits and, thus, can have a real potential to substantially reduce human rights violations. The following article questions this as existent work on the effects of PTAs on human rights standards neglects a selection process underlying the implementation of these treaties. Countries being aware of the ‘shadow of the future’ already take into account what may happen at the succeeding enforcement stage when establishing a particular PTA. This implies that states agree on ‘hard’ human rights standards in PTAs only if they have a general propensity to abide by human rights in the first place. For testing the empirical implications of their argument, the authors collected new data on PTAs in 1976/77-2009, and employ genetic matching techniques. The results support the theoretical argument that PTAs are unlikely to affect human rights compliance when controlling for the outlined selection problem.     

What Kinds of Trade Liberalization Agreements Do People in Developing Countries Want?

One of the most striking developments in the global economy in the past decades is the rapid proliferation of preferential trade agreements (PTAs), with many of them concluded among or with participation of developing countries. On the presumption that current popular debates on trade policy are not so much about whether citizens want free trade but rather what kinds of trade liberalization they want, we examine individual trade policy preferences with regard to PTAs that can vary in content along several dimensions. To that end we carried out conjoint choice experiments embedded in representative surveys in three developing countries that differ strongly in income levels, political system, and trade liberalization history: Costa Rica, Nicaragua, and Vietnam. We conceptualize trade policy preferences as preferences over the scale and scope of trade liberalization, environmental and labor standards, and labor market access (migration). Two main findings emerge. First, non-economic considerations, such as sympathy/antipathy toward particular countries and environmental and labor rights concerns influence citizens’ preferences at least as much as factors based on standard economic logic. Second, preferences over particular facets (attributes) of trade liberalization, that is PTA content, are surprisingly consistent across countries, despite strong differences in macro-economic and political context.     

Why do some international institutions contain strong dispute settlement provisions? New evidence from preferential trade agreements

To understand why some international institutions have stronger dispute settlement mechanisms (DSMs) than others, we investigate the dispute settlement provisions of nearly 600 preferential trade agreements (PTAs), which possess several desirable case-selection features and are evoked more than is realized. We broaden the study of dispute settlement design beyond “legalization” and instead reorient theorizing around a multi-faceted conceptualization of the strength of DSMs. We posit that strong DSMs are first and foremost a rational response to features of agreements that require stronger dispute settlement, such as depth and large memberships. Multivariate empirical tests using a new data set on PTA design confirm these expectations and reveal that depth – the amount of policy change specified in an agreement – is the most powerful and consistent predictor of DSM strength, providing empirical support to a long-posited but controversial conjecture. Yet power also plays a sizeable role, since agreements among asymmetric members are more likely to have strong DSMs due to their mutual appeal, as are those involving the United States. Important regional differences also emerge, as PTAs across the Americas are designed with strong dispute settlement, as are Asian PTAs, which contradicts the conventional wisdom about Asian values and legalization. Our findings demonstrate that rationalism explains much of international institutional design, yet it can be enhanced by also incorporating power-based and regional explanations.     

Trade, institutions, and the timing of GATT/WTO accession in post-colonial states

Prior to 1995, when the World Trade Organization (WTO) superseded the General Agreement on Tariffs and Trade (GATT), a number of states took advantage of GATT Article XXVI:5(c), which allowed them—as former colonies or component territories of existing GATT members—to quickly and simply join the multilateral trade regime. The speed with which these post-colonial accessions took place, however, varied widely: some states joined immediately upon independence, while others joined much later. Still other post-colonial states passed on this opportunity, only to subsequently begin the longer, more onerous accession process required of other GATT/WTO applicants. Our paper seeks to explain this variation in the timing of post-colonial states’ accession to the GATT/WTO. We argue that three key variables explain the timing of accession decisions: 1) a country’s trade ties with existing member-states; 2) its existing preferential trade agreement (PTA) commitments; and 3) its domestic political institutions—specifically, the country’s level of democracy. Furthermore, we argue that the effects of these variables are conditional upon each other: post-colonial countries with more extensive trade ties to existing member-states were more likely to accede rapidly under Article XXVI:5(c), but only under specific conditions—namely, when they had not already locked in ties with key trading partners through bilateral or regional PTAs, and when they were governed by a more democratic regime. We test this argument empirically using an original dataset of 61 post-colonial states from 1951 to 2004. Our results strongly support this explanation of GATT/WTO accession and help to clarify the pattern of participation in the multilateral trading system that we have observed over the last half-century.     

Protecting labor rights in preferential trade agreements: The role of trade unions,left governments,and skilled labor

This paper investigates variation in the design of labor provisions in preferential trade agreements (PTAs) by focusing on the power of trade unions, the role of government partisanship, and the relative strength of skilled labor. We expect strong trade unions and left-leaning governments to be associated with more, and more far-reaching labor provisions in PTAs. We also expect the strength of skilled workers relative to the strength of unskilled workers to negatively correlate with the depth of labor provisions in PTAs. In addition, the effect of trade unions should be conditional on both the presence of left government and democracy. We test these hypotheses relying on an original dataset of labor provisions included in 483 PTAs signed between 1990 and 2016. This dataset covers 140 different labor provisions that relate to six overarching dimensions. The quantitative analysis finds support for the expectations concerning the influence of trade unions and the role of a country’s skill profile.     

The European Union’s trade and investment policy in Asia: new challenges and opportunities in a changing global environment – or: following individual roadmaps

Asia is Europe’s largest trading partner and EU-Asia trade relations have undergone a rapid change since the global financial crisis. On a global scale, the new multilateral trade agreements such as the now stalled Trans-Pacific Partnership (TPP) involving European Unions’ (EU) major trading partners such as Japan, Singapore and Vietnam also have the potential to change the trade equations. In this paper, we evaluate the new EU trade policy which has been designed to ensure that the EU benefits from the changing global trade scenario and also look at the steps which have been taken by the EU to promote trade relations with its major trading partners in Asia in the predicted ‘Asian century’. We look into the Free Trade Agreements, which are being negotiated with its Asian partners and seek to understand the reasons which have resulted in delays in their signing and negotiations. We evaluate new policies pushed forward by its Asian partners such as the One Belt One Road policy by China and Japan’s policy of securing a large number of trading agreements in the America. Moving ahead, we also shed light on the indirect factors that may influence the success of EU trade negotiations in Asia such as the EU policy on granting China market economy status and the commencement of the ‘Brexit’ process. Lastly, we try to present a list of immediate priorities for EU in Asia, which will ensure that it secures a toehold in trade with the region. All in all, it is shown that the EU has not one and the same approach for all Asian countries but it negotiates flexibly and individually country by country. Because of this “country by country approach” the EU is also not ready to enter into general EU-ASEAN trade negotiations again.     

Labor–Management Relations: Understanding and Practicing Effective Negotiations

Periodic collective bargaining between employers and unions, combined with contract administration and workplace dispute resolution, has provided many core insights for the broad field of negotiations. Over the past twenty-five years, this arena has advanced knowledge regarding the interdependence of integrative and distributive bargaining, the concurrent shaping of attitudes, the management of internal relations (within a party), and the roles of elected and appointed agents. Public sector negotiations have provided new insights into the dynamics of multilateral bargaining as well as a broad array of mediation and arbitration models. While the number of labor agreements negotiated each year has declined over the past half century, at least 23,000 private sector agreements are still executed each year and fundamental changes in industrial relations systems make continued attention to labor–management negotiations of increasing importance. In particular, this arena now features highly structured approaches applying interest-based bargaining principles and presents profound challenges as power relations shift in multiple ways.     

Sustaining multilateral trade cooperation in a multipolar world economy

The deadlock in the WTO Doha Round has been accompanied by an increased focus on the negotiation of preferential trade agreements, including so-called ‘mega-regionals’. This paper discusses possible implications for—and possible responses by—excluded countries that have little prospects of participating in most of the mega-regionals. A number of complementary avenues are identified through which such countries might attenuate the potential downsides of preferential trade liberalization among large countries, as well as some proposals that would expand the scope to pursue cooperation on regulatory policies in the WTO as opposed to PTAs.     

Integrative and Distributive Bargaining Situations in the European Union: What Difference Does It Make?

Despite the distinction made between integrative and distributive bargaining situations in European studies literature, few studies have focused specifically on how these two situations differ. This article attempts to close this gap by examining two key bargaining situations involving fisheries that led to the Europeanization of this policy field. The integrative bargaining situation dealt with the negotiations about the structural policy and common organization of the market for fish products. In contrast, the distributive bargaining case focused on the protracted negotiations over resource conservation and management policies. The article focuses primarily on how the unanimity decision rule may affect negotiation patterns in the European Union and on how the specific type of bargaining situation affects policy outcomes. The thesis is that different bargaining tools are used to reach an agreement.     

Good for some,bad for others: US investors and non-trade issues in preferential trade agreements

Preferential trade agreements (PTAs) trigger investment through their commitment to a liberal market economy. Increasingly however, PTAs go far beyond liberalizing trade and investment flows. Especially controversial features included in most modern PTAs are environmental and labor standards. Do these standards affect business activity? If so, how do investors react to such non-trade issues in trade deals? The literature provides inconclusive findings about the impact of standards on foreign direct investment (FDI). Some contributors argue that strict standards decrease FDI, whilst others claim that environmental and labor protection increases productivity and, in consequence, inward investment. In all likelihood, the usage of aggregated FDI data, as is the case for most studies, causes confusion. I expect standards to influence investors’ decisions – but heterogeneously across sectors. Environmental and labor standards should reduce FDI in polluting and low-skilled labor endowed industries, but increase investment in environmentally clean and high-skilled labor abundant sectors. Based on an original dataset of environmental and social standards in trade agreements and at the sector-level disaggregated US-FDI data, I find robust support for my argument. The paper provides a more nuanced picture on the standards and investment nexus: Standards have no uniform effect on multinationals. Instead, they are good for some, but bad for other industries.     

The Paradox of Weakness in European Trade Policy: Contestation and Resilience in CETA and TTIP Negotiations

Over the last decade, trade negotiations with Canada and the United States met with considerable resistance from non-governmental organisations (NGO). Moreover, the negotiation mandates given to the European Commission were so broad as to include topics falling under so-called mixed competence of the EU and the member states, necessitating not only ratification by the EU Council of Ministers and the European Parliament, but also member states’ parliaments. At some point, these two factors almost seemed to paralyze the EU as a trade negotiator. In the end, however, the EU concluded an agreement with Canada, renegotiated its agreement with Mexico (while also concluding agreements with Singapore and Japan amongst others), while negotiations with the US were suspended. Three factors can account for this puzzling combination of apparent incapacity and blockage and surprising resilience of EU trade policymaking. First, the NGO contestation campaigns did not muster pan‐European but rather only varying degrees of support. Second, in addition to scrutiny by the European Parliament, consensus decision-making in the Council fosters accommodation of the demands of all member states. This leads to a low degree of negotiating autonomy on the part of the European Commission, yet large bargaining power for the European Union, as long as the other side wants agreement. Finally, a recent ruling by the Court of the EU facilitated the decoupling of agreements on portfolio investment and investment arbitration (one of the most difficult hurdles), from all other matters of trade and regulatory cooperation, making it easier to reach agreement.     

Preventing protectionism: International institutions and trade policy

This paper examines the role of international institutions in preventing the rise of protectionism. We analyze states?? choices in trade policy during the current global economic crisis, a situation likely to exacerbate uncertainty in the conduct of commercial relations and to push countries toward ??beggar-thy-neighbor?? trade policies. The main argument of the paper is that the numerous international institutions present in the international system during the current economic crisis serve as conveyors of information and mechanisms of commitment and socialization. They mitigate the uncertainty problem that prevails in prisoner??s dilemma settings such as trade. Economic international organizations increase the flow of information about the preferences and behaviors of its members. Non-economic organizations also have a role to play as social environments that encourage cooperation. Specialized international institutions devoted to trade, such as the WTO and preferential trade agreements (PTAs), not only provide monitoring and enforcement functions but also lock in commitments to liberal trade through legal obligations that make defections costly. We test our argument using a dataset of trade policies during the current economic crisis and of membership in international organizations. The paper finds strong support for the role of international institutions as commitment and socialization mechanisms in preventing the rise of protectionism.     

Who Liberalizes? Explaining Preferential Trade Liberalization

Despite the growth in research on preferential trade arrangements (PTAs), few studies have systematically explored why some PTAs have been more successful than others at liberalizing trade among members. In this paper I test four hypotheses concerning intra-PTA liberalization: a regional system structure hypothesis, an international institutions hypothesis, a domestic institutions hypothesis, and an economic hypothesis. Although all four types of variables are statistically significant, only international institutions have substantively large effects on intra-PTA liberalization. This suggests that policymakers have considerable latitude to promote integration, as the impact of “choice” variables such as international institutions far outweighs that of “given” factors such as regional system structure or the nature of member economies.     

Trade at the margin: Estimating the economic implications of preferential trade agreements

Preferential Trade Agreements (PTAs) have become the most prevalent form of international trade liberalization in recent decades, even though it remains far from clear what their effects on economies and their key units, firms, are. This paper evaluates the distributional consequences of trade liberalization within industries differentiating two distinct aspects in which trade liberalization could result in higher trade flows: the intensive vs. the extensive margin of trade. In particular, we analyze whether trade liberalization leads to increased trade flows because either firms trade more volume in products they have already traded before (intensive margin) or because they start to trade products they have not traded previously (extensive margin), or both. We test these arguments for the Dominican Republic–Central America–United States Free Trade Agreement (CAFTA-DR) and exporting firms based in Costa Rica for the time-period 2008–2014. The results of our study suggest that the effects of CAFTA-DR depend not only on whether we analyze the extensive versus the intensive margin of trade but also whether the product in question is homogenous or differentiated and whether the exporting firm under analysis is small or large. In particular, we find support for the theoretical expectation that firms exporting heterogeneous products, such as textiles, gain from trade agreements, such as CAFTA-DR, in that they can export more varieties of their products. Yet at the same time, they tend to lose at the intensive margin by a reduction in their trade volume while the opposite pattern occurs for firms exporting homogenous products.     

Sequencing Negotiating Partners: Implications for the Two‐Level Game?

In the late 1990s, Japan and South Korea concluded their first bilateral free trade agreements (FTAs) in completely opposite sequences despite similar domestic pressures. Japan concluded an "easier" FTA with Singapore first and then concluded a more "difficult" FTA with Mexico. South Korea concluded a more difficult FTA first with Chile and then moved on to negotiate with Singapore. In this article, I analyze these cases and review the literature on bargaining and two-level games to develop a model of how these differences in sequence account in part for the relative differences in each country's bargaining strength in their more difficult negotiations. The preexistence of the Singapore FTA eased domestic pressures to reap the benefits of entry into the bilateral FTA game. Thus, Japan could approach the more difficult FTA negotiation knowing that a "no-agreement" outcome would not fundamentally increase domestic pressure to get into the free trade "game." This alternative to no agreement put the Japanese in a stronger international bargaining position. South Korea negotiated its harder case knowing that the relative domestic pressure to get in the FTA game would increase without an agreement. This relatively worse bargaining position created a context in which South Korea conceded more internationally at the expense of higher side payments domestically.