Preferential Trade Agreements Partners Research Articles

Trade effects of non-economic provisions in trade agreements

We assess the relationship between non-trade provisions (NTPs) pertaining to labor standards and the environment in preferential trade agreements (PTAs) and bilateral exports of environment and labor-intensive products between PTA partners, controlling for aid-for-trade, development assistance for labor and environment-related projects, and the enforceability of NTPs. NTPs are associated with greater exports of environment- and labor-intensive goods from high-income PTA members, while there is a negative relationship between NTPs and labor-intensive exports from developing countries. Bilateral exports of donors granting aid for trade are strongly associated with a higher propensity of recipients to participate in deep PTAs. Results are consistent with arguments that NTPs may increase trade costs for developing countries and that NTPs in part reflect commercial interests of high-income countries.

Dispute Settlement in Preferential Trade Agreements and the WTO: A Network Analysis of Idleness and Choice of Forum

Abstract It is generally presumed that World Trade Organization (WTO) members display a preference for dispute settlement under WTO rules over those provided for in preferential trade agreements (PTAs). This assumption is driven by observations relating to the large number of PTAs, the low number of PTA cases and the large number of WTO cases, including between PTA partners. These observations are challenged by adopting a methodology that has so far seen relatively limited use in the study of international law network analysis. This article finds, first, the network of connections among WTO members formed by PTAs is far less dense than appears to have been assumed. Second, while almost half of all WTO members have participated in WTO proceedings at least once, the vast majority of bilateral relations among WTO members have never been subject to WTO dispute settlement. This puts the perceived idleness of PTA dispute settlement into perspective. Lastly, the share of WTO cases that could have been settled under PTA procedures is far lower than commonly believed. This low share shows that there is no widespread predilection for the WTO, as commonly argued, but, more often than not, a genuine absence of choice. Ultimately, as the PTA network is unable to act as a substitute, WTO dispute settlement continues to hold a central place in the rules-based global trading system.

Greening up: the effects of environmental standards in EU and US trade agreements

ABSTRACTCan environmental provisions in preferential trade agreements (PTAs) foster an environmental race to the top? The ways in which different enforcement mechanisms in North–South PTAs affect the implementation of environmental standards in developing countries are examined. It is argued that environmental provisions in European Union (EU) and United States (US) PTAs will be effective in instigating policy change in partner countries, although the timing of the effect will vary significantly. Fines and sanctions in US PTAs incentivize partner countries to reform during the negotiation process. Reform in EU PTA partners is predicted to occur during agreement implementation as a result of the EU’s policy dialogue approach. Illustrative evidence is provided and the hypotheses are tested using statistical estimations of EU and US PTAs with environmental provisions on developing countries’ environmental policy reform.

Selecting Partner Countries for Preferential Trade Agreements: Experimental Evidence From Costa Rica, Nicaragua, and Vietnam

Preferential trade agreements (PTAs) constitute the most rapidly growing form of trade liberalization in the global economy. In contrast to, for example, the World Trade Organization, PTAs allow for discrimination among potential partner countries. This helps explain their proliferation. But it also raises an important question: which countries are preferred partners for PTAs? On the presumption that public opinion matters—both normatively and analytically—for trade policy, we study what types of countries citizens prefer for PTAs. We focus on developing countries, as they both play an increasingly important role in the expanding global network of PTAs and also remain understudied in the literature on international cooperation and trade policy. To account for the multidimensionality of PTA partner country choice, we develop and test a theoretical framework through conjoint experiments embedded in national surveys in Costa Rica, Nicaragua, and Vietnam. The results show that, despite starkly divergent national contexts, citizens in all three countries opt for similar partner countries. Respondents prefer culturally similar countries, democracies, and countries that maintain high environmental and labor standards. Somewhat surprisingly, economic size and geographic distance prove less important in the choice of which countries to support as PTA partners.

Promoting trade through private law: Explaining international legal harmonization

A large body of research examines states’ efforts to increase international trade through public law, that is, by forming preferential trade agreements (PTAs) that lower governmental barriers to trade. Scholars, however, have overlooked another mechanism through which states seek to facilitate trade: international harmonization of private law. Underlying legal harmonization is the assumption that cross-national variation of commercial law impedes trade; by contrast, similarity of laws across countries encourages trade by reducing uncertainty and transaction costs. I argue that the harmonization of private law acts as a substitute for the public-law channel of stimulating trade: countries with limited PTA partnerships make up for this deficiency by joining initiatives for private-law harmonization. This argument is tested by analyzing the UN Convention on Contracts for the International Sale of Goods-one of the primary instruments of legal harmonization. Indeed, countries that are party to shallow PTAs or have few PTA partners are more likely to ratify this private-law convention. Overall, this article urges scholars of trade and international law to broaden their research agenda to include private law.

Dial PTAs for Peace: The Influence of Preferential Trade Agreements on Litigation between Trading Partners

Preferential trade agreements (PTAs) are en vogue both as policy tool, as well as research subject. We do not beg to differ. In this article, inspired by the behaviour of the European Union (EU), we ask whether the proliferation of PTAs and the negotiation of mega-regionals, like the Trans-Atlantic Trade and Investment Partnership (TTIP) between the EU and the United States (US), risk undermining the WTO Dispute Settlement Mechanism (DSM), 'the crown jewel of the WTO system'. The EU is the world's biggest participant in PTAs. It is also, after the US, the most active participant to WTO disputes. Yet, in the twenty years since the creation of the WTO, it has only been involved in a tiny number of disputes with PTA partners. We find that, despite appearances to the contrary, the US has also been involved in very few WTO disputes with its PTA partners. Moreover, without assigning causal relationship to the signature of a PTA and the amount of litigation between preferential partners, we show that there is inverse correlation between the two. We find it likely therefore that the number of WTO disputes is likely to continue decreasing as WTO Members, including the EU and the US, continue signing PTAs. It remains to be seen whether the WTO system will profit or suffer from the likelihood of fewer WTO disputes.

The Coevolution of Trade Agreement Networks and Democracy

The proliferation of preferential trade agreements (PTAs) and the wave of democratization are among the most significant developments in international relations during the past three decades. The correlation between these is well noted. The causal link between these phenomena, however, remains unclear. On one hand, democracies have been found to be more likely to join PTAs. On the other hand, trade agreements should foster democratization because they undermine the ability of governments to distribute rents to maintain an autocratic regime. If PTAs and democracy coevolve through a selection and a contagion effect, then conventional statistical techniques can produce wholly misleading results. This article presents a new approach based on recent advancements in longitudinal network analysis. Our findings confirm that historically, democratization indeed made states more likely to sign PTAs, but that trade agreements also encourage the democratization of a country, in particular if the PTA partners are themselves democracies.

Does dialogue work? The effectiveness of labor standards in EU preferential trade agreements

ABSTRACTWhile both the European Union (EU) and the United States (US) include labor standards in their preferential trade agreements (PTAs), they pursue different approaches in enforcing these standards. The US relies on coercion while the EU prefers a softer, no-sanctions approach. Are both effective in improving labor rights in partner states and what are the mechanisms leading to this improvement? Recent evidence suggests there is a positive ex ante effect of US labor provisions as PTA partners improve their labor conditions prior to signing an agreement to satisfy the US constituent preferences. Building on this scholarship, we argue that the effect of EU standards will also be positive but exhibited ex post as a result of learning by civil society actors during the implementation phase of labor provisions. We test and confirm this argument by estimating an ordered probit of the protection of labor rights in EU trade partners before and after signing a PTA.

Safeguards and the Perils of Preferential Trade Agreements: Dominican Republic Safeguard Measures

The legal-economic implications of how WTO members apply an import-restricting safeguard measure become more complex in light of the increasing web of trade concessions undertaken through their preferential trade agreements (PTAs) in addition to their WTO commitments. This paper examines a number of complex issues that arose in the WTO litigation between five new PTA partners through the Dominican Republic – Safeguard Measures disputes. First, we highlight the difficulties in assessing the extent to which safeguards imposed following a PTA are the result of PTA concessions relative to developments that pre-date or are otherwise unrelated to the PTA. Second, we analyze the WTO Panel decision through which a number of previously unresolved questions in the WTO’s safeguards jurisprudence arose. Third, we identify how safeguard-related provisions within a PTA may themselves give rise to constraints that subsequently affect how a country may apply safeguards made available under the WTO Agreements, and we describe some implications for PTA design and negotiation. Finally, we examine the broader implications that arise from the interplay of PTAs, safeguards, and dispute settlement in light of the availability of both relatively substitutable policy instruments and dispute resolution forums.

Safeguards and the perils of preferential trade agreements:Dominican Republic–Safeguard Measures

AbstractThe legal-economic implications of how WTO members apply an import-restricting safeguard measure become more complex in light of the increasing web of trade concessions undertaken through their preferential trade agreements (PTAs) in addition to their WTO commitments. This paper examines a number of complex issues that arose in the WTO litigation between five new PTA partners through theDominican Republic–Safeguard Measuresdisputes. First, we highlight the difficulties in assessing the extent to which safeguards imposed following a PTA are the result of PTA concessions relative to developments that pre-date or are otherwise unrelated to the PTA. Second, we examine how the WTO Panel resolved a number of previously unanswered questions in the WTO's safeguards jurisprudence that arose in these cases. We suggest that the Panel rightly foreclosed a number of potentially dubious practices that WTO members might otherwise have pursued when using safeguards to circumvent trade concessions. Third, we identify how safeguard-related provisions within a PTA may give rise to constraints that subsequently affect how a country may apply safeguards available under the WTO Agreements, and we describe some implications for PTA design and negotiation. Finally, we analyze the broader implications that arise from the interplay of PTAs, safeguards, and dispute settlement in light of the availability of both relatively substitutable policy instruments and dispute resolution forums.

Impact of preferential trade agreements (PTAs) on firms’ degree of internationalization

Purpose– The purpose of this paper is to postulate the impact of preferential trade agreements (PTAs) on internationalization strategies of member countries’ firms. The study also aims to triangulate the proposed model using empirical data from PTA partner economies.Design/methodology/approach– The mixed methods research design is used for the purpose of inquiry as suggested by Creswell. The inductive reasoning based on critical literature review and grounded theory methodology is used to postulate the model. Explanatory strength of the model is triangulated using empirical longitudinal trade data of Pakistan with her bilateral PTA partners, i.e. Malaysia, Mauritius, Iran, Sri Lanka and China. Internationalization indices are adapted following the Ietto-Gillies and London (2009) and Petri (1994) to measure the intensity and geographical diversification dimensions of internationalization. Country-level trade statistics are used as a proxy of firm-level data to explain the international expansion of home firms resulting from PTAs.Findings– Empirical results confirm a strong and long-term impact of PTAs on the intensity and extensity dimensions of internationalization over post-agreement period in Pakistan and member economies. Gravity index depicts greater concentration of Pakistan's trade in FTA markets and thereby confirms the influence of PTAs on international market selection. Analysis at sectoral level depicts a contraction in services trade whereas expansion in the manufacturing firms’ export growth to member economies.Originality/value– The paper extends the theory of internationalization by identifying PTAs as exogenous variable influencing internationalization strategies of member countries’ firms in a developing South Asian context. Coupled with findings from empirical data, the study identifies PTAs as a new strategic trade policy tool available to policy makers for promoting and influencing the home firms’ internationalization strategies.

Beyond Trade: The Impact of Preferential Trade Agreements on FDI Inflows

This paper investigates the effects of preferential trade agreements (PTAs) on net FDI inflows of member countries using a comprehensive database of PTAs in a panel setting. PTA membership is associated with a positive change in net FDI inflows and FDI gains increase with the market size of PTA partners and their proximity to the host country. The estimated relationship is driven by the developing countries in the sample and agreements signed in the late 1990s–early 2000s, a period when the majority of “deep integration” PTAs have been advanced.

Preferential trade agreements and their role in world trade

This paper investigates the effects of preferential trade agreements (PTAs) on bilateral trade using a comprehensive data base of PTAs in force and a detailed matrix of world trade. Total trade between PTA partners is a poor proxy for preferential trade (trade in tariff lines where preferences are likely to matter): while the former was one-third of global trade in 2000–2002, the latter was between one-sixth and one-tenth. Gravity model estimates indicate that using total trade to assess the impacts of PTAs leads to a significant downward bias in the PTA coefficient: the semi-elasticity of trade with respect to PTA membership rises from 87% for total trade to 119% for preferential trade. Product exclusions and long phase-in periods significantly limit preferential trade; the marginal impact of South-South agreements on preferential trade is much higher than North-South PTAs, while the effect of North-North agreements is insignificantly different from zero.

Regional economic integration and geographic concentration of multinational firms

A number of theoretical studies have predicted that preferential trade agreements (PTAs) raise outside multinationals’ incentive to invest in the participating countries, especially in those that are integrated with larger markets and have lower production costs. The hypothesis has, however, not been tested empirically. This paper addresses the issue by estimating the impact of PTAs on countries’ ability to attract multinationals. The evidence is broadly consistent with expectations. The formation of PTAs leads to an increase in FDI by outside multinationals, but the effect varies sharply with the size of integrated markets and countries’ comparative advantage. Countries integrated with larger markets experience a greater increase in total and export-platform FDI. Those with a higher labor endowment also attract more FDI especially in labor-intensive industries, but at the expense of their labor-scarce PTA partners.