Abstract and Keywords
In recent decades there has been an explosion in the number and importance of preferential trade agreements (PTAs), which vary dramatically in their design. Design elements include the treaty’s depth, scope, membership, rigidity, and institutionalization. This chapter examines (1) how the design of a PTA affects the behavior of its members and (2) what designs are optimal for a given political-economic context. While members benefit from international trade cooperation, they sometimes experience domestic political pressure to violate treaty obligations. The chapter shows how institutional design elements affect the likelihood that members will comply with treaty obligations and the long-term stability of the PTA. We show that countries’ equilibrium behavior changes with the rigidity of the PTA. As the number of PTAs has increased, an overlapping and complex network has emerged. Turning to the system level, the chapter examines how the PTA network can inhibit trade cooperation and identifies design elements that can mitigate this effect.
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