The Co-Evolution of Depth, Flexibility and Enforcement in Trade Agreements: A Network Analysis Application

Abstract
Over the past ten years a large number of studies has explored the diffusion and design of international institutions (Elkins et al. 2006; Baccini and Dür 2012; Manger et al. 2012). A related stream of research has formally theorized and empirically demonstrated the interdependence between different dimensions of treaty design, in particular, the positive correlation between depth and flexibility (Rosendorff and Milner 2001; Rosendorff 2005; Baccini et al. forthcoming). In this paper, we make a first attempt to link these two literatures. We argue that trade-related regulations diffuse from one preferential trade agreement (PTA) to another as a result of competition among states. The resulting diffusion of depth-related provisions simultaneously impacts also the flexibility and enforcement dimensions of PTA design. Concretely, countries that adopt deep trade-related regulations from competitors also have incentives to include escape clauses to mitigate costs of compliance and dispute mechanisms to stabilize cooperation. In short, PTA depth co-evolves with flexibility and enforcement. We test our hypotheses using an original dataset on the design of 587 PTAs from 1948 to 2009. The Desta dataset includes a fine-grained operationalization of different design dimensions of PTAs (Dür et al. 2014). To formally and empirically model the simultaneous diffusion of different PTA dimensions, we rely on statistical network analysis. Specifically, we use a stochastic actor-oriented model of network co-evolution (Snijders 1996, 2001). We represent PTA depth, flexibility, and enforcement as dynamic networks of interdependent ties among states and analyze their co-evolution over time. This approach allows us to model the diffusion of one design characteristic as a function of the diffusion of the other two dimensions as well as of endogenous dependencies in the PTA network and exogenous covariates. Our paper contributes to the literatures on international cooperation, the political economy of trade, and the rational design of international institutions.