Negotiating exclusion: Regulatory barriers in preferential trade agreements

İpek Çınar and Robert Gulotty

Economics and Politics, 2022, vol. 34, issue 1, 192-220

Abstract: Trade negotiations now center on regulations. This paper argues that these negotiations can raise uncertainty over fixed costs. We develop a simple model of exporter competition to show how uncertainty generated by negotiations redistributes profits across firms. We show that regulatory uncertainty reduces competition by deterring entry on the part of less productive firms and shifting market share toward top producers. Empirically, we show that this negotiation‐driven uncertainty can help explain the economically concentrating effects of preferential agreements. Preferential trade agreements combine tariff concessions with regulatory changes that ensure the benefits of the agreement are limited to member states. Using novel data covering firm‐level export activity and public investment decisions in the automotive and automotive parts sectors during NAFTA, we find that negotiation‐driven uncertainty deterred non‐North American producers while benefiting the top American auto manufacturers.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/ecpo.12195

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecopol:v:34:y:2022:i:1:p:192-220

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0954-1985

Access Statistics for this article

Economics and Politics is currently edited by Peter Rosendorff

More articles in Economics and Politics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().