How Do Global Trade Rules Evolve? Strategic Sequencing in International Economic Law

Abstract

How and why do global trade rules evolve? When the EU revised the investment chapter of its recent trade deal with Canada it was widely believed that the amendments were motivated by concern over the design of another agreement: the yet-to-be-completed Transatlantic Trade and Investment Partnership with the United States. Yet, there is no formal link between those two agreements. Indeed, the literature generally sees preferential trade agreements (PTAs) as products of signatories' bilateral relations. This article challenges this view. I argue that past agreements create precedent that shapes subsequent agreements, and that policymakers act accordingly. Specifically, I argue that the sticky nature of legal commitments creates incentives for states to sequence agreements, signing ambitious PTAs with less important partners to establish model agreements for use with more important partners. A two-stage regression analysis on the sequencing and design of bilateral PTAs from 1965 to 2016 supports this argument. For states that care most about enforcing global trade rules, agreements that are under-predicted by an economic and political gravity model tend to be more ambitious, and signed sooner. These same states are more likely to 'ratchet' agreements, progressively increasing the depth of their agreements over time. This is further borne out in evidence from recent agreements negotiated by the EU and New Zealand: agreements with less-important partners have been seized on as opportunities to innovate. Legal language has a way of sticking around, and negotiators know it. Thus, states sign agreements with an eye to the future.