The Value of Trade Agreements in the presence of Political pressures

Abstract

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Testing the Value of the Postwar International Order

“…This analysis does point to possible Eichengreen, 2011. Jonathan Kirschner compares the reaction to the Great Depression with the 2008 crisis, and while his emphasis is not on institutions or norms, many aspects of the "relatively benign" international environment he adduces as the difference-and the specific "monetary cooperation" he describes-fit the basic concept; see Kirschner, 2014. d For an analysis of the limits to the post-crisis protectionist measures undertaken, as well as the potential cost of a trade war, see Bussière et al, 2010. e On the theoretical value of institutions in constraining protectionist pressures, see Maggi, 1999;Maggi and Rodriguez-Clare, 1998;and Staiger and Tabellini, 1999. Studies that link international institutions explicitly to protectionist restraint after 2008 include Gawande, Hoekman, and Cui, 2015;and Eichengreen, 2016, who discusses specifically the role of central bank coordination to reduce the beggar-thy-neighbor effects of activist monetary policies.…”

Special and Differential Treatment of Developing Countries in the WTO

“…the temptation of countries to act in a non-cooperative manner to improve their terms of trade), recent studies have emphasized a domestic source of inefficiency: when setting trade policy, a government may be unable to make credible commitments to the private sector; if this is the case, countries may have commitment motives to join trade agreements, if these help to reduce (or even eliminate) governments discretionary power in setting tariffs (e.g. Staiger and Tabellini, 1987;Matsuyama, 1990;Rodríguez-Clare, 1998 and2007). Domestic commitment problems are particularly severe in developing countries.…”

“…For example, it has been argued that Mexico's negotiators were mostly driven to join NAFTA by the desire to "tie their own hands" and boost the credibility of domestic reforms, rather than by market access considerations (Whalley, 1998). This idea has been formalized by Maggi and Rodríguez-Clare (1998), who show that a time-inconsistency problem in trade policy may arise in a small economy when capital is fixed in the short run but mobile in the long run. They suggest that entering into binding trade agreements can be a solution to this problem.…”

“…We build on the idea that governments may enter trade agreements in order to enhance the credibility of their own domestic policies (e.g. Staiger and Tabellini, 1987;Matsuyama, 1990;Maggi and Rodríguez-Clare, 1998). We describe a simple model of bilateral trade between a small developing country and a large trading partner, based on earlier work (Conconi and Perroni, 2012).…”

Testing Conflicting Political Economy Theories? Full-Fledged versus Partial-Scope Regional Trade Agreements

“…Manipulations by special interest groups representing import-competing sectors are often considered a source of trade diversion and "stumbling block" effect. 3 The recent literature of endogenous trade agreement formation (e.g., Rodriguez-Clare, 1998 &2007;Mitra, 2002) suggests that trade agreements may serve a commitment device to tie the hand of a politically motivated government or a government with low bargaining power. Ornelas (2005aOrnelas ( , 2005b shows that FTAs lowering the domestic market shares of import-competing sectors reduce their incentives of lobbying for higher external tariffs ("rent dissipation" effects).…”