Sending the Right Signal (at the Right Time): Explaining US Bilateralism with Developing Countries
46 Pages Posted: 16 Sep 2009 Last revised: 21 Oct 2010
Date Written: September 16, 2009
Abstract
Which are the main drivers of US bilateralism? And similarly, which is the rationale for developing countries to propose a trade agreement with the US? To address these questions, I model a two-stage bargaining process. In the first stage, the developing country has to decide whether or not to propose a PTA; if it does, the US may enter the negotiations or refuse. In the second stage, which is the actual negotiation phase, the US dictates strict conditions to developing countries and, if and only if they fulfill these conditions, an agreement occurs. From this simple theoretical setting, I argue that the desire of developing countries to implement economic reforms is the main driver of US bilateralism. I test quantitatively two hypotheses related to this argument using a battery of econometric tools and an original dataset. The database covers 142 countries from 1990 to 2007. In doing so, I contribute to research on development and regionalism.
Keywords: US trade policy, trade agreements, economic reforms, signaling theory, dynamic model
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