Votes, Vetoes, and Preferential Trading Agreements

ABSTRACT Preferential trading agreements (PTAs) are proliferating rapidly. By 2006, according to the World Trade Organization (WTO), nearly 300 PTAs were in force, covering approximately half of the overseas trade conducted worldwide. Although just about every country now belongs to a PTA, some states have rushed to join many of these arrangements, whereas others have joined very few of them. What explains these variations? Some studies have emphasized that states enter PTAs to generate economic gains. There is considerable evidence that PTAs have ambiguous welfare implications, which sheds doubt on the claim that countries join them for economic reasons alone. Instead, we emphasize the domestic political benefits and costs for leaders contemplating membership. Two domestic political factors-the nature of the regime and the number of veto players-play a significant role in determining whether countries sign a PTA. The results of our statistical tests furnish considerable support for these arguments. Based on an analysis of all PTAs formed since World War II, more democratic states are more likely to establish PTAs than their less democratic counterparts. We also find that states are less likely to enter a trade agreement as the number of veto players increases