Trade creation, political sensitivity and product exclusions: the political economy of agriculture protection in China’s FTAs*

Abstract

One of the main features of Free Trade Agreements (FTAs) is that certain products are excluded from tariff concessions. But why do some products receive more protection than others in FTAs? In this paper, we use disaggregated agricultural product data and a political economy analytical framework to examine the determinants of product exclusions from tariff reductions in China’s FTAs. Taking into account the political costs of the incumbent government, our results show that products associated with trade creation and politically sensitive products are more likely to be excluded from tariff concessions in FTAs. Furthermore, we show that the Chinese government tends to use its negotiating power to achieve various objectives by seeking more economic benefits from large trading partners and making more concessions to small ones.