Leveling-up: explaining the depth of South-South trade agreements

Abstract

Conventional wisdom holds that not all preferential trade agreements (PTAs) are alike. Trade agreements between developed and developing countries (North-South PTAs) tend to be characterized by great depth, such that they include chapters for many trade-related regulatory issues, including intellectual property, foreign investment, and investor-state dispute settlement, among other things. In this way, North-South PTAs are thought to be different from South-South PTAs (between developing countries), which are shallower and focus on removing traditional tariff barriers to trade, as opposed to tackling trade-related regulatory issues. However, some developing countries appear to prefer deeper trade agreements, which begs the questions: How deep are South-South PTAs and what explains the variation in their depth? We address these questions using statistical analysis and interviews with current and former trade officials from developing countries. Our findings show that developing countries form deep trade agreements with one another when both are parties to North-South PTAs, as each are familiar and comfortable with the sorts of provisions in deep agreements. Our findings suggest that the formation of deep trade agreements between developing countries reflects socialization into the liberal international order through policy learning.