Design Of Trade Agreements Research Articles

On Trade Agreements and a Social Reproduction Approach to GVCs: A Reply to Donatella Alessandrini

Abstract The 15 years following the 2008–2009 global financial crisis witnessed increasing questioning in the global North of the distribution of the gains and costs of an open world economy and the multilateral rules-based trade order. Difficulties in (re-)negotiating trade agreements in the World Trade Organization led states to shift even more of their focus to reciprocal and bilateral trade agreements as these internalize benefits among partners by continuing to maintain trade barriers against non-signatories (mostly emerging economies). There is a vigorous debate across academic disciplines whether such agreements help to increase participation in global value chains (GVCs) by signatory nations and the magnitude and incidence of the associated economic, social and environmental impacts – positive or negative. These are questions calling for rigorous empirical research that assesses impacts against appropriate baselines and counterfactuals and investment in data collection, monitoring and evaluation by participating governments. Mischaracterizing both the extent to which trade agreements constrain the ability of states to regulate and reports published by international organizations on GVCs and trade agreements detracts from where the focus arguably should be: providing compelling empirical evidence that GVCs and trade agreements detrimentally affect social reproduction and specific suggestions on how the design of trade agreements should be changed to improve outcomes.

MEASURING THE REACH OF ASIAN REGIONAL FOOD REGIMES IN THE WTO ERA

abstract Although the food regime concept has become an important approach for addressing the global food trade, most of its applications have utilized qualitative methods. This article applies a quantitative social network analysis (SNA) and a more-than-qualitative relational approach, drawing from the geography literature to explore regional food regimes in Asia in the World Trade Organization (WTO) era. Employing data from the Food and Agriculture Organization Corporate Statistical Database (FAOSTAT) and the Design of Trade Agreements (DESTA) project database, this paper’s analysis of the governance of Asian regional vegetable trade networks reveals the multiplicity inherent in food regimes under the WTO. In this context, the topologies of food regimes—including degree centrality, betweenness centrality, and closeness centrality—reveal the emergence of a multi-polar food system in Asia.

Trade agreements with cross-border unbundling

Does cross-border unbundling of production process introduce a new reason for trade policy intervention and change the role of trade agreements? This paper revisits the purpose and design of trade agreements in a theoretical framework that considers the firm’s global production operations with cross-border sourcing of intermediate inputs subject to trade costs, inclusive of trade policy interventions by governments. The paper highlights an interrelationship among market-clearing prices of final goods and the associated domestic and imported intermediate inputs due to their dependence on trade policies through production linkage, which gives a novel feature to the purpose and design of trade agreements beyond the conventional market-access argument associated with the terms-of-trade theory. Specifically, local price externality arises in the sense that a government uses a combination of trade policies to manipulate the local price for domestically-sourced intermediate inputs in the trading partner country. To achieve globally efficient outcomes through trade agreements, we propose to specify market access using the trade-weighted version of terms of trade so that governments effectively coordinate in changing value-added created from trade within the production chain in a reciprocal manner.

Leadership Turnover and the Durability of International Trade Commitments

Under what conditions do states uphold their formal trade commitments? While recent work focuses on the formation and design of trade agreements, we know comparatively little about the durability of agreements over time. We argue that government turnover undermines states’ commitments to liberalization, even if they have already signed an international agreement meant to constrain their behavior. We test this argument using data on realized trade in the presence of around 300 preferential trade agreements (PTAs) since 1970. Even in the presence of an international agreement, ideological turnover is associated with increased political barriers to trade, especially when the shift is toward left-wing leaders. These findings have important implications for our understanding of international cooperation: If new leaders do not adhere to their predecessors’ commitments, international agreements may not have lasting economic consequences.

Tariff binding and overhang: Theory and evidence

Most market access commitments under the WTO are in the form of bindings on applied tariff rates. We observe two important regularities in the data. First, applied tariffs are often lower than the bound tariffs, providing governments with substantial policy flexibility. Second, the extent of flexibility varies substantially across sectors and countries. In a sharp contrast to the prediction of standard trade agreement models, we observe a strong negative correlation between tariff commitments and measures of import market power. We model the trade-off between discipline and flexibility in the design of trade agreements, and argue that recognizing this trade-off is the key to explain the observed patterns in the tariff binding commitments and applied tariffs under the WTO.

Delocation and trade agreements in imperfectly competitive markets

We consider the purpose and design of trade agreements in imperfectly competitive environments featuring firm-delocation effects. In both the segmented-market Cournot and the integrated-market monopolistic competition settings where these effects have been identified, we show that the only rationale for a trade agreement is to remedy the inefficiency attributable to the terms-of-trade externality, the same rationale that arises in perfectly competitive markets. Furthermore, and again as in the perfectly competitive benchmark case, we show that the principle of reciprocity is efficiency enhancing, as it serves to “undo” the terms-of-trade driven inefficiency that occurs when governments pursue unilateral trade policies. Our results therefore indicate that the terms-of-trade theory of trade agreements applies to a broader set of market structures than previously thought.

Going Beyond the 0/1 Dummy: Estimating the Effect of Heterogeneous Commitments on Services Trade

The proliferation of preferential trade agreements in services (STAs) and improved availability of data on bilateral services trade flows has resulted in a growing literature on the theoretical and empirical assessment of services trade effects. However, this literature has not considered the different types of provisions found in STAs while estimating the trade effects. We address this issue taking into account the heterogeneity of provisions found in STAs using the Design of Trade Agreements (DESTA) database (Dur et.al, 2014). Our results suggest that not accounting for this heterogeneity lends an upward bias to the magnitudes of the estimated trade effects. This finding is robust to estimations involving only positive and those incorporating zero trade flows as well as to sample coverage (all, EU, non-EU, North-North, North-South).

The design of international trade agreements: Introducing a new dataset

Preferential trade agreements (PTAs) have been proliferating for the last twenty years. A large literature has studied various aspects of this phenomenon. Until recently, however, many large-N studies have paid only scant attention to variation across PTAs in terms of content and design. Our contribution to this literature is a new dataset on the design of trade agreements that is the most comprehensive in terms of both variables coded and agreements covered. We illustrate the dataset’s usefulness in re-visiting the questions if and to what extent PTAs impact trade flows. The analysis shows that on average PTAs increase trade flows, but that this effect is largely driven by deep agreements. In addition, we provide evidence that provisions that tackle behind-the-border regulation matter for trade flows. The dataset’s contribution is not limited to the PTA literature, however. Broader debates on topics such as institutional design and the legalization of international relations will also benefit from the novel data.

The Design of International Trade Agreements: Introducing a New Database

Preferential trade agreements (PTAs) have been proliferating for the last twenty years. A large literature has studied various aspects of this phenomenon. Until very recently, this literature has treated all PTAs as equal. However, PTAs differ significantly in terms of design. In this paper, we present a new dataset on the design of trade agreements (DESTA). We illustrate the usefulness of this dataset in re-visiting the literature on the PTA-trade nexus, that is, the questions if and to what extent PTAs impact trade flows.