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During the last two decades, the number of preferential trade agreements (PTAs) grew almost exponentially to over 270 by 2010. A majority of these are agreements between developed and developing countries. Existing models provide little economic rationale for these agreements, but the existing literature lumps North-South PTAs together with other types of trade pacts. This article offers an explanation focused on the movement of less capital-intensive manufacturing from North to South, which in turn stimulates the exchange of similar goods differentiated by unit value—also referred to as vertical intra-industry trade. The North exports more capitalintensive goods, while more labor-intensive goods are produced and traded by the South. This kind of specialization creates incentives for governments to support PTAs. The author tests this model using a new measure of vertical trade specialization and finds strong evidence that such specialization promotes PTA formation. North-South PTAs should therefore be seen as part of a broader shift of manufacturing from high- to middle-income countries.

The proliferation of preferential trade agreements (PTAs) and the wave of democratization are among the most significant developments in international relations during the past three decades. The correlation between these is well noted. The causal link between these phenomena, however, remains unclear. On one hand, democracies have been found to be more likely to join PTAs. On the other hand, trade agreements should foster democratization because they undermine the ability of governments to distribute rents to maintain an autocratic regime. If PTAs and democracy coevolve through a selection and a contagion effect, then conventional statistical techniques can produce wholly misleading results. This article presents a new approach based on recent advancements in longitudinal network analysis. Our findings confirm that historically, democratization indeed made states more likely to sign PTAs, but that trade agreements also encourage the democratization of a country, in particular if the PTA partners are themselves democracies.

Exchange rate manipulation—the active devaluation of a currency through intervention in the foreign exchange market—is a frequent trigger of international disputes. Yet it is not an obvious policy choice: as a blunt tool to boost export competitiveness, it is disliked by citizens and importers because of the loss of purchasing power it entails, and because it benefits those with investment abroad at the expense of those with savings at home. It is thus notable that a group of East Asian countries, from Japan and Korea to Thailand, undertake frequent and often large interventions to devalue their currencies. What explains their policy choice? We provide evidence that exchange rate depreciations are undertaken at the behest of export industries. Because lobbying activities in East Asian countries are not directly observable, we focus on Japan and Korea and construct a proxy measure of lobbying by exporters, drawing on news reports. We use machine learning to scale daily reports of industry demands in the two leading financial newspapers, the Japanese Nihon Keizai Shimbun and, in a robustness check, the Korean Hankyung, over twenty-five years. We find evidence that mounting public pressure by organized economic interest groups precedes intervention and induces currency depreciation.

How and why do the policy areas covered in World Bank loan conditions change over time and across borrowers? We hypothesize that shifts in the Bank’s economic research and policy priorities influence Bank loan conditions, even after controlling for country characteristics and international political aspects. To test this claim we apply keyword-assisted topic models to the analysis of over 13,000 World Bank policy loan conditions and close to 35,000 World Bank research papers published between 1985 and 2014. Contrary to the criticism levelled against the Bank that changes in research and policy priorities are mostly rhetorical and have little substantive effect on Bank lending, we find that internal research and policy priority shifts explain the conditions in a Bank loan at least as well as more traditional donor or borrower-specific measures central to IPE models of Bank lending.

Why do developing countries negotiate North—South trade agreements, when they already enjoy preferential market access to developed-country markets? Most developing countries benefit from the generalized system of preferences (GSP) and related schemes when they export to the United States, the EU, and other developed economies. And yet, many pursue fully reciprocal agreements that require major concessions to the developed partner. We argue that this is due to the nature of the GSP as a unilateral concession that can be (and often is) taken away. High dependence on unilateral, removable preferences generates \"political trade dependence\" (PTD). We distinguish PTD from standard measures of trade dependence, and we explain why PTD motivates developing countries to seek North—South Regional Trade Agreements (RTAs). We show the effects of PTD with a selection of illustrative cases and test our hypothesis on a data set of EU and US trade agreements with developing countries. We find robust statistical support for our hypothesis that high and rising levels of PTD make the negotiation of a North—South RTA more likely.

Bilateral trade agreements have proliferated rapidly within the last two decades, growing into a dense network of multiple ties between countries. The spread of preferential trade agreements (PTAs), however, is not uniform: some countries have signed a multitude of deals, while others remain much less involved. This article presents a longitudinal network analysis method to analyze the patterns of the formation of trade agreements, based on the mutual codetermination of network structure and agreement formation. The findings suggest that PTAs spread endogenously because of structural arbitrage effects in the network, and that they establish a hierarchy among countries. Rich countries form ties with each other and middle-income countries, who themselves create a horizontal layer of PTAs, but least-developed countries are left behind and do not form many ties. Supplanting the multilateral trade regime with preferential agreements therefore creates a system of highly asymmetrical relationships of weaker spokes around a few hubs.

In this paper, we investigate the causes and consequences of institutional design choices in the liberalization of services trade and investment in preferential trade agreements (PTAs). We distinguish between a positive-list and a negative-list approach to services liberalization, and analyze PTAs signed by countries of the Asia-Pacific. We develop an information-based argument that explains why these different types induce path dependence in subsequent choices, and derive hypotheses that capture the “history” effect of choosing either institutional model. In doing so, we examine whether particular “modes of governance” diffuse through the growing network of trade agreements through the adoption of rules by third parties in their own PTAs. The empirical analysis tests these hypotheses using simulation-based dynamic network analysis methods. We find evidence of strong path dependence in the choice of liberalization approach, affecting the evolution of PTA networks in the Asia-Pacific and the diffusion of services liberalization in general. Such path dependence has long-term consequences for the institutional features of the international trade regime.

Are preferential trade agreements (PTAs) in the Asia-Pacific region merely a political phenomenon with no economic basis, as some critics say? I challenge this interpretation; in this article I present an explanatory model based on intra-industry trade to indicate what economic interests should drive Japanese and South Korean PTAs with ASEAN partners, and derive specific predictions. An analysis of the actual tariff barrier elimination in the agreements suggests important, but highly specific, economic benefits. First, preference margins are substantively greater for intra-industry trade, and second, intra-industry trade is much less likely to be excluded from tariff reductions when imported into Japan or South Korea. This indicates that PTAs help firms specialize their production throughout the region, and provides an economic rationale for these agreements. A qualitative case study of the Japan-Malaysia PTA and a statistical analysis of tariff liberalization in the PTAs of Japan and South Korea with the ASEAN countries support this view.