Reasons for incomplete provisions

Abstract

This chapter identifies two reasons for incomplete IIAs: strong protectionism and lack of institutional capacity. Both substantially increase transaction costs and result in incompleteness far below the optimum level. First, protectionist motives, lobbying, and host countries' ongoing legal reforms are arguably the main reasons for incomplete IIAs. A strong preference for gradual, rather than rapid, market openings by host countries' legislative bodies can induce negotiation teams to leave their IIAs incomplete. Lobbying activities by protected industries in host nations make difficult for a negotiation team to conclude a complete version of an IIA. Moreover, complications arising from ongoing legal reforms in host countries, such as examining and sorting out unsettled domestic measures, further challenge the completion of IIAs. In addition to protectionism, a lack of institutional capacity, both failures in intra-government coordination and cooperation as well as a concomitant lack of legal and technical expertise, causes incomplete IIAs. First, limited coordination and cooperation between a negotiation team and line ministries result in incomplete IIAs. The negotiation team may leave agreements incomplete because the ministries do not (or cannot) timely comply with a team's requests for information. Many ongoing bilateral and multilateral negotiations have deadlines, and line ministries have difficulties completing all requested tasks on time. Another problem is the lack of legal and technical expertise. Many host countries, particularly developing countries, lack sufficient legal expertise and have trouble understanding the legal consequences of modifying the terms of an IIA. This chapter analyzes the reasons for the absence of legal expertise, including staff turnover, a lack of human resources, and an inability to hire legal counsel.