How do global trade rules evolve? Strategic sequencing in international economic law

Abstract

How do global trade rules evolve? This article argues that agreements create precedent that shapes subsequent negotiations, and policymakers exploit this precedent. Specifically, states sequence agreements, using negotiations with likeminded or relatively less important partners to establish model rules for subsequent use where negotiations will be more challenging. By institutionalizing negotiating positions where stakes are low, negotiators seek to improve the odds of replicating preferred terms in later, more challenging deals. A two-stage regression analysis on trade agreement design from 1965 to 2016 and qualitative probes from the UK and New Zealand support the argument: agreements with less important partners are presented as strategic opportunities to innovate and set precedent. Legal language has a way of sticking around, and states know it. States sign agreements with an eye to the future.

Keywords:

• Preferential trade agreements
• precedent
• path-dependence
• international agreements
• international trade
• mixed-methods research

Acknowledgments

I thank Krzysztof Pelc, Leo Baccini, and Ed Mansfield for many helpful comments. I also thank Vincent Arel-Bundock, Guillaume Beaumier, Mark Brawley, Alice Chessé, Arc Zhen Han, Lucy King, Lisa Lechner, Abe Newman, Lou Pingeot, participants at workshops and talks at McGill University, IPES (2017), and several interview participants. I gratefully acknowledge a Bourse de doctorat en recherche pour étudiants étrangers (file no. 193907) from the Fonds de recherche du Québec–société et culture (FRQSC). Coding on WTO dispute data was conducted with Lauren Konken, whom I also thank for comments. I am grateful to the editors and the anonymous reviewers for very constructive feedback.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Canadian Broadcasting Company, 21 January 2016. http://www.cbc.ca/m/touch/politics/story/1.3412943.

2 The Globe and Mail, September 14 2017, A1.

3 In a purely economic model, such ‘excessive’ agreements might be welfare-reducing (Baier & Bergstrand, 2004, p. 57).

4 This was a sticking point in negotiations for the Japan-Australia FTA and for the TPP.

5 These preferences may reflect new demands from domestic groups (as with the domestic pushback against ISDS rules in the EU) or policymakers’ own agendas. Negotiating postures might mischaracterise the preferences of domestic groups if it improves bargaining positions (Putnam, 1988, p. 453).

6 Analysis in Table 9 in the appendix supports this supposition.

7 The Whitehouse, ‘President Donald J. Trump is Fulfilling His Promise on the United States–Korea Free Trade Agreement and on National Security’ (September 24, 2018). https://www.whitehouse.gov/briefingsstatements/president-donald-j-trump-fulfilling-promise-united-states-korea-free-trade-agreement-nationalsecurity

8 The Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.

9 Morin, Dür, and Lechner (2018, codebook p. 7).

10 See Table 6 in the Appendix.

11 http://data.imf.org/dot.

12 http://data.worldbank.org/data-catalog/world-development-indicators.

13 https://www.wto.org.

14 First-stage regressions are in the appendix.

15 See the appendix.

16 The results from a negative binomial regression (available on request) are substantively the same as for the results from the Poisson regression in Column 3.

17 See https://www.mfat.govt.nz/en/trade/free-trade-agreements/.

18 Cited in Hoadley (2017, ch. 6).

19 Hon Lockwood Smith, cited in Hoadley (2017, ch. 6, fn. 3).

20 Interview with New Zealand Consul General to Shanghai, Guergana Guermanoff, Shanghai, 19th June 2017. https://www.beehive.govt.nz/speech/singapore-trade-agreement-snap-debate.

21 https://www.beehive.govt.nz/speech/singapore-trade-agreement-snap-debate.

22 Art. 207 of the Treaty on the Functioning of the European Union, TFEU.

23 https://www.gov.uk/government/collections/the-uks-trade-agreements.

Additional information

Notes on contributors

Matthew A. Castle

Matthew Castle is a Lecturer in International Relations at Te Herenga Waka/Victoria University of Wellington. He researches issues in international and comparative political economy, with a focus on the politics of international trade and trade agreement design.