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1 2 3 4 Edward D. Mansfield and Helen V. Milner. 2012. Votes, Vetoes, and the Political 5 6 Economy of Agreements (Princeton, NJ: 7 Press) 8 9 Kerry A. Chase 10 11 12 The proliferation of preferential trade agreements (PTAs) rates among the most 13 conspicuous developments in the world economy of late. Research on this phenomenon 14 has multiplied about as rapidly as its occurrence. For several years, Edward Mansfield 15 and Helen Milner have advanced this line of scholarship in a co-edited volume (1997) 16 and several journal articles (some with other co-authors). Their book, Votes, Vetoes, and 17 18 the Political Economy of International Trade Agreements, will surely change how 19 researchers approach the study of PTAs. Its analytical core is an original and simple 20 institutional explanation for why governments enter these arrangements. Scholars 21 working from other theoretical traditions will have no choice but to incorporate, refute, or 22 23 somehow come to grips with this new perspective. 24 Studies of PTAs in the 1960s and 1970s by functionalists and other analysts of 25 regional integration were built around narrative and dominated by a single case, the 26 European Community. The spread of PTAs in the 1980s and 1990s and the application 27 of new approaches to understand them introduced more cases and analytical perspectives, 28 29 perpetuating to a degree the elaboration of a different theory (or theoretical emphasis) to 30 fit each instance of these complex bargains. A decade ago, it was hard to dispute Gilpin‟s 31 (2000, 344) pronouncement that “[t]he diversity of regional arrangements makes broad 32 generalizations and overarching theories or explanations of impossible.” 33 34 Now those days are long gone. Mansfield and Milner account for the many hundreds of 35 PTAs struck since 1950 in rigorous statistical models with just a handful of variables. 36 Along the way they acknowledge the explanatory value of (and control for) several 37 existing propositions about when, why, and with whom states enter these arrangements. 38 Their main purpose, however, is to accentuate the powerful—and largely overlooked— 39 40 contributions of two key factors: a state‟s regime type and the number of veto players in 41 its political system. 42 The book‟s central arguments, spelled out in chapter 2, go roughly as follows. 43 First, are more likely to enter PTAs than non-democracies because electoral 44 competition motivates governments to pursue trade cooperation. In a , the 45 46 chief executive risks losing office if the economy slackens, but a shrewd leader may be 47 able to elude voter backlash through policies that reassure the public that his economic 48 management is sound. Trade agreements are an especially effective tactic to retain voter 49 trust because they signal the executive‟s commitment to hold at bay protectionist 50 51 demands that could harm the economy. By this logic, democracy induces leaders to 52 contrive a commitment device to persuade voters; PTAs make this reassurance credible 53 by externally monitoring state promises, creating audience costs for governments that 54 buckle to special interests. Second, countries are less likely to enter PTAs the more 55 prevalent are domestic veto players. Some veto players hail from opposition parties 56 57 seeking to drive the executive from office and, moreover, special interests injured by 58 trade will work through veto players to block PTA formation. The larger the number of 59 veto players, the harder it is to craft agreements that attract enough domestic support and 60 61 62 63 64 65 1 2 3 4 the greater the bribes that must be paid to secure ratification. This means higher 5 transaction costs of trade cooperation, hence fewer PTAs. 6 7 The novelty of these claims is evident in how little they rely on received wisdom 8 about the political economy of PTAs. Countless studies have probed systemic sources of 9 PTAs, notably declining hegemony, regional diffusion, the global business cycle, and the 10 Cold War‟s end. Mansfield and Milner reference these conjectures and subject them to 11 12 fresh scrutiny in chapter 3. Another literature emphasizes societal demands for PTAs by 13 domestic groups such as exporters, multinationals, and sectors heavily engaged in intra- 14 industry trade. The authors credit this research as well and loosely draw from it: pro- 15 trade groups in their framework provide monitoring and information for the general 16 public, enhancing the incentives for democratic executives to check protectionist 17 18 pressures. Yet neither systemic nor societal factors, they argue, offer a full account of 19 why, when, and where PTAs form. The larger part of the story is political institutions, 20 which shape the calculations of state leaders in their external trade interactions. 21 In the development of these claims, interest group approaches are alternately close 22 23 allies and primary targets. The book‟s larger implication is clear: PTAs are rooted in the 24 electoral politics of democracies, not the distributive politics of industry coalitions; 25 leaders form them to placate voters, not to please special interests. However, one of these 26 co-authors is renowned for uncovering how industry demands influence policy (Milner 27 1988, 1997a, 1997b) and the book appears unready to cast this work aside completely. 28 29 At times it grants the importance of industry preferences while denying it at others. 30 Some of the charges leveled against interest group approaches build from a selective 31 reading of the theoretical literature and case history, which may not persuade skeptical 32 readers. The strongest point in their favor is that data are not available to test on a large 33 34 number of cases any of the numerous variants of societal arguments available; these 35 propositions have not been formulated with the same generality as the straightforward 36 institutional theory the authors introduce. It is this hearty blend of simplicity and breadth 37 that makes their argument so compelling. 38 The core hypotheses about regime type and veto players find strong support in a 39 40 series of statistical models in chapter 4. Here the setup is the workhorse of PTA studies, 41 directed dyads observed over a fifty-three year period, which yields more than 1 million 42 country pairs that could have entered a PTA together in any given year. The empirical 43 analysis joins the authors‟ dataset on PTA formation and ratification dates with off-the- 44 shelf measures of their primary independent variables (POLITY for regime type; the 45 46 Political Constraint Index for veto players) and numerous controls. Estimated 47 coefficients for regime type and veto players are statistically significant and substantively 48 large. Moreover, these results stand up to several model permutations and robustness 49 checks, as Mansfield and Milner anticipate and dispose of just about every objection that 50 51 comes to mind. The inclusion of domestic variables together with the systemic factors 52 identified in the previous chapter provides what looks like a full picture of spatial and 53 temporal trends in PTA formation. In fact, the authors point out, some systemic factors 54 (the Cold War‟s end; geographic distance) are at least as important as their institutional 55 determinants of PTAs. 56 57 Though these correlations are striking, it is fair to ask whether the book has its 58 causation right. Propositions about institutional effects on cooperation often emphasize 59 strategic interaction between democracies: shared democracy strengthens trust, enhances 60 61 62 63 64 65 1 2 3 4 information, and aids in making commitments credible, thus democracies find it easiest to 5 cooperate with one another. As Mansfield and Milner see it, however, democracy is an 6 7 incentive for PTAs irrespective of the regime type of prospective PTA partners: 8 democracies have no trouble striking trade agreements with autocracies; autocracies just 9 have less of a need for them. But what if democracies systematically snub autocracies in 10 their calculations about negotiating partners to minimize cheating risks? (Autocracies do 11 12 enter some PTAs, after all—are they mostly with other autocracies?) Or, for that matter, 13 what if states seeking PTAs avoid partners with too many veto players so as to limit the 14 pressure they will face for concessions? Anecdotes to illustrate these sorts of two-level 15 game conjectures abound. While they may be way off base, it would have been worth the 16 authors engaging them, and the literature on democracy and cooperation, more deeply. 17 18 The book does however probe eight auxiliary hypotheses in chapter 5. This 19 section provides important corroboration for several key assumptions that underpin the 20 core theoretical claims. Wherever possible, these analyses build off the baseline model 21 of the previous chapter, enabling findings to cumulate. Especially convincing is the test 22 23 of the fourth hypothesis, which strongly demonstrates, using three alternative measures, 24 that more politically competitive autocracies are less likely to enter PTAs than 25 democracies, but more likely to do so than less politically competitive autocracies. The 26 authors also offer preliminary indications that democratic leaders who sign PTAs enjoy 27 greater longevity in power, though their stipulation that “bad economic times” should be 28 29 easier for these officeholders to survive unfortunately does not find its way into the 30 model. (Incidentally, evidence that voters actually punish democratic leaders who break 31 PTA commitments would have strengthened this link in their causal chain.) One other 32 result, that trade-exposed democracies are more likely to enter PTAs, appears to favor the 33 34 societal approaches that the authors prefer to dismiss. Their interpretation stays true to 35 their argument: voters in trade-dependent democracies are better informed (a potentially 36 testable proposition), exacerbating the commitment problems their leaders face. The 37 obvious alternative explanation is that trade gives interest group demands for PTAs more 38 vigor. It at least appears to mediate the effect of democracy on PTAs, which the previous 39 40 chapter reported (p. 113) was not the case. 41 A nagging issue throughout is the relationship between PTAs and other trade 42 agreements. PTAs are the subject of study; however the book‟s title reads „international 43 trade agreements‟ not „preferential trade agreements.‟ The text uses these terms and the 44 simpler „international agreements‟ and „commercial agreements‟ interchangeably. Yet 45 46 chapter 2 briefly clarifies that PTAs and GATT-WTO agreements are not perfect 47 substitutes: PTAs, the authors assert, are more binding than the GATT-WTO, which 48 grant poorer countries too many exceptions for these commitments to be credible. 49 Setting aside the implication that PTAs must then have more domestic value for smaller 50 51 and developing countries than for larger and developed countries (testable but untested 52 propositions), the claim that “PTAs are often better monitored and enforced than the 53 WTO” (p. 36) calls for some kind of justification. If even domestic audiences discount 54 GATT-WTO commitments, then why do states make them and invest so much in 55 extracting the same from others? The question obviously transcends the book‟s scope. 56 57 The problem is that PTAs and the multilateral system interact in important ways, and if 58 the authors are correct—that leaders can freely cheat on the GATT-WTO as, say, George 59 W. Bush did by protecting steel and hiking farm subsidies while negotiating free trade 60 61 62 63 64 65 1 2 3 4 agreements with Chile and Central America—then how much do PTAs really reassure 5 voters that their leaders will not cave to special interests? 6 7 Impressionistic demurrals are no match for the battery of statistical tests that 8 Mansfield and Milner line up to muster support for their argument. These few quibbles 9 aside, theirs is a magnificent book, among the most provocative written on the subject. 10 An effective antidote to a literature once prone to a different story for each unique 11 12 arrangement, the analysis integrates systemic and institutional influences on PTAs into a 13 single framework whose starting point is state leaders and their electoral incentives. 14 Readers seeking detailed narratives of trade politics will not find them here; the empirics 15 are quantitative from start to finish. Nor will those looking to weed out competing 16 hypotheses get much help—propositions rarely go unsupported as almost everything in 17 18 the models is statistically significant. Still, the more tentative results, particularly in 19 chapter 5, leave plenty of work for future researchers. Nobody interested in the political 20 economy of trade can ignore this book. Without question, it will be widely read and 21 cited, as it deserves to be. 22 23 24 References 25 Gilpin, R. (2000). The challenge of global capitalism: The world economy in the 21st 26 century. Princeton: Princeton University Press. 27 Mansfield, E. D., & Milner, H. V. (Eds.). (1997). The political economy of regionalism. 28 29 New York: Press. 30 Milner, H. V. (1988). Resisting protectionism: Global industries and the politics of 31 international trade. Princeton: Princeton University Press. 32 Milner, H. V. (1997a). Interests, institutions, and information: Domestic politics and 33 34 . Princeton: Princeton University Press. 35 Milner, H. V. (1997b). Industries, governments, and the creation of regional trade blocs. 36 Mansfield, E. D., & Milner, H. V. (Eds.). The political economy of regionalism. New 37 York: Columbia University Press. 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65