Why breakup? Looking into unsuccessful free trade agreement negotiations

Abstract

In this first attempt to systematically analyze why countries (not) sign FTAs, we differentiate between country pairs that initiated negotiations but did not reach conclusion from pairs that did not initiate negotiations. By comparing successful and unsuccessful negotiations, we can have a better understanding why countries decided (not) to pursue FTAs. In explaining the outcome of FTA negotiations, the paper sheds light onto negotiation resources from three perspectives: resource allocation, resource diversion and resource requirement. By conducting a systematic comparison of 25 FTA negotiations conducted by Singapore, the study finds that FTA negotiation tends to be unsuccessful when (1) negotiating parties do not have diplomatic missions in the partner country (resource allocation); (2) negotiating parties conduct multiple FTA negotiations in parallel (resource diversion); and (3) negotiation becomes complicated due to the significant difference in MFN tariff between the two parties (resource requirement).