How Electoral Rules and Electoral Prospects Affect the Formation of Preferential Trade Agreements?

Abstract

This paper proposes a novel explanation for why states form preferential trade agreements (PTAs). I argue that current governments, anticipating them losing power in the future, use PTAs to constrain future governments. This mechanism can generate two unique observable implications that are not compatible with existing theories. Because the demand for constraining opponents varies with electoral institutions and electoral prospects, I expect governments are more likely to ratify PTAs under the under majoritarian electoral rules and before losing elections. Empirical results from a dataset of all PTAs from 1945 to 2006 strongly support these hypotheses.