The Political Economy of Free Trade Agreements: an Empirical Investigation

Liu, Xuepeng

doi:10.11130/jei.2008.23.2.237

“…Although most of the FTAs/CUs have long staging periods in internal tariff reduction and some of them may violate the spirit of the Article XXIV, they are offered much less scope for exchanging arbitrary preference than PTAs. This paper is related to Dutt and Mitra (2002) and Liu (2008), who find empirical support for the median voter model (pro-labor) in trade policies and FTA/CU formation respectively. This paper distinguishes partial-scope from full-fledged RTAs and provides a better Service agreements signed under the GATS Article V are not considered separately in this paper because they usually parallel to FTAs/CUs in goods.…”

Section: " ---Gatt Enabling Clause (Italics Added By Author)mentioning

confidence: 86%

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

Liu

¹

2009

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Abstract:The median voter approach to trade policies within a Heckscher-Ohlin framework predicts that trade policy is pro-labor; while the lobbying model based on the argument of the free rider problem predicts that trade policy is pro-capital. We test these conflicting political economy theories using data on regional trade agreements (RTAs). Due to the violation of the conditional independence assumption of RTAs, we apply a duration analysis rather than standard binary choice analysis to the RTA panel data. The results show that the prediction of the medianvoter model is supported by the full-fledged free trade areas and customs unions (FTAs/CUs); while the prediction of the lobbying model is supported by the partial-scope preferential trade arrangements (PTAs) among developing countries. Our findings hold better for the country pairs with more different capital-labor ratios due to stronger distributional effects of RTAs. The support for the median voter model (lobbying model) is stronger when the two countries in a pair have left-oriented (right-oriented) governments. We also find stronger support for the median voter model for the subset of FTAs/CUs with service coverage and stronger support for the lobbying model for countries that place higher weight on political contribution.

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“…An increase in inequality reduces the desirability of signing an RTA, ceteris paribus, if a country is more labor abundant relative to its partners. 5 Based on Levy (1997) and Liu (2007), Liu (2008) derives the same pro-labor prediction of the median voter model in the case of free trade agreements. 6 Please note that this model is a modified specific-factor model rather than a Heckscher-Ohlin model.…”

Section: Theoretical Predictionsmentioning

confidence: 90%

“…This article is related to the work of Dutt and Mitra (2002) and Liu (2008), who find empirical support for the median voter model (pro-labor) in trade policies and FTA/CU formation, respectively. This article distinguishes partial-scope from full-fledged RTAs and provides a better understanding of the conflicting distributional forces behind RTA formation.…”

Section: Introductionmentioning

confidence: 96%

Testing Conflicting Political Economy Theories: Full‐Fledged versus Partial‐Scope Regional Trade Agreements

Liu

¹

2010

Southern Economic Journal

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Abstract:The median voter approach to trade policies within a Heckscher-Ohlin framework predicts that trade policy is pro-labor; while the lobbying model based on the argument of the free rider problem predicts that trade policy is pro-capital. We test these conflicting political economy theories using data on regional trade agreements (RTAs). Due to the violation of the conditional independence assumption of RTAs, we apply a duration analysis rather than standard binary choice analysis to the RTA panel data. The results show that the prediction of the medianvoter model is supported by the full-fledged free trade areas and customs unions (FTAs/CUs); while the prediction of the lobbying model is supported by the partial-scope preferential trade arrangements (PTAs) among developing countries. Our findings hold better for the country pairs with more different capital-labor ratios due to stronger distributional effects of RTAs. The support for the median voter model (lobbying model) is stronger when the two countries in a pair have left-oriented (right-oriented) governments. We also find stronger support for the median voter model for the subset of FTAs/CUs with service coverage and stronger support for the lobbying model for countries that place higher weight on political contribution.

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“…The value ranges from 20 (for a pair of completely autocratic states) to 20 (for a pair of fully democratic states). Numerous studies have shown that a pair of democracies is more likely to enter PTAs because democratic leaders utilize PTAs to increase public support for their political tenures (Drury, Krieckhaus & Yamamoto, 2014;Liu, 2008;Mansfield et al, 2002;Yamamoto Rosenbaum & Krieckhaus, 2016). At the same time, several studies suggest that highly democratic countries are prone to choose bilateral PTAs over multilateral PTAs, as bilateral PTAs can bring deals more customized to benefit member states and, therefore, find it easier to pass a long ratification process at home (Levy, 1997;Mansfield & Milner, 2012;Molders, 2012).…”

Section: Methodsmentioning

confidence: 99%

RCEP or TPP? An Empirical Analysis Based on Global Experience

Rosenbaum¹

2018

Asian Politics and Policy

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The Trans‐Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) are two of the most discussed preferential trade agreements (PTAs) in the 21st century. However, the future of these PTAs—whether they will be implemented—still remains mired in debate. This paper empirically explores various factors contributing to the development of the agreements based on the recent patterns of multilateral PTAs across the globe. It also discusses the Comprehensive and Progressive Trans‐Pacific Partnership (CPTPP), for which negotiations have just begun among the TPP members, without the United States. The analysis reveals both political and economic factors that affect the complex situation surrounding these PTAs. In addition, a trilateral PTA among China, Japan, and South Korea may help promote the implementation of the RCEP. The chances of the CPTPP forming are higher than that of the TPP, which means the TPP is likely to form without the United States.

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The Political Economy of Free Trade Agreements: an Empirical Investigation

Abstract: This paper studies how income inequality affects the probability of signing free trade agreements (FTAs) • JEL classification: F15, F12•

Cited by 13 publications

References 35 publications

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

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

Testing Conflicting Political Economy Theories: Full‐Fledged versus Partial‐Scope Regional Trade Agreements

RCEP or TPP? An Empirical Analysis Based on Global Experience

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