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Creating unfinished institutions: power trajectory and the consequences of incomplete trade agreements

Abstract

Today, there is uncertainty about the future of global trade. In the west, major comprehensive trading arrangements are renegotiated or exited. Meanwhile in Asia, new but more limited trade agreements, particularly those signed by China and India, proliferate. What are the likely consequences of these new but divergent trends? To develop a better understanding of these changes in international trade, this article develops a framework focused on the under-theorized relationship between the comprehensiveness of a trade agreement and the power trajectory of the signatories. The framework suggests rising states can benefit from initially unfinished agreements that they can subsequently expand as their bargaining power increases. Relatively declining states conversely can derive advantages from comprehensive agreements because this allows them the option to lock-in a deteriorating power position by making alteration of the existing treaty more difficult. Original analysis of four states’ trade agreements, and two major agreements, NAFTA and the China-ASEAN FTA, constitute a plausibility probe of this framework.

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Notes

  1. Whilst the issue of preference formation in trade negotiations is an important one, this is beyond the scope of the article. The purpose here is to understand the ways in which states may benefit from different agreement designs rather than explaining the preferences of states themselves.

  2. As the article builds on insights from contract theory, the terms ‘agreement’ and ‘contract’ are used interchangeably throughout.

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Correspondence to Michael Sampson.

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Sampson, M. Creating unfinished institutions: power trajectory and the consequences of incomplete trade agreements. Int Polit 59, 346–366 (2022). https://doi.org/10.1057/s41311-021-00308-1

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  • DOI: https://doi.org/10.1057/s41311-021-00308-1

Keywords

  • Institutional selection
  • International institutions
  • Trade
  • China
  • Institutional design