Deep Trade Agreements and Domestic Institutions in the Americas

Preferential trade agreements (PTAs) have spread rapidly around the world since the 1990s. In the Americas, the proliferation of trade agreements with countries from within and beyond the region have resulted in a 'spaghetti bowl' of overlapping rules and regulations, some of which address behind-the-border issues such as investment, competition, labor, and environmental standards. Earlier research has linked trade agreements to increased foreign investment inflows. This article argues instead that the effects of PTAs on FDI depend on the domestic institutional capacities of member countries. Domestic institutions condition the benefits and effectiveness of PTAs by influencing governments' external credibility as well as their ability to implement the agreements they sign. The empirical findings show that weak state capacity exacerbates the spaghetti-bowl effects of multiple, overlapping agreements. Moreover, it is not the quantity but the quality, and more specifically, the depth of trade agreements that matters for attracting FDI. Los acuerdos de libre comercio se han propagado rapidamente por el mundo a partir de los anos noventa. En las Americas, la proliferacion de acuerdos comerciales con paises dentro y fuera de la region ha resultado en un 'spaghetti bowl' de reglas y regulaciones paralelas y que se superponen. En este trabajo, argumentamos que el efecto de los acuerdos preferenciales de comercio (APC) sobre la IED depende de la calidad de las instituciones nacionales en los paises miembros. Las instituciones politicas de cada pais miembro afectan la credibilidad externa, asi tambien como su capacidad para implementar los acuerdos que firman, de esa forma condicionando los beneficios y la efectividad de los APC. De acuerdo con nuestro analisis empirico, la baja capacidad estatal exacerba efectos negativos del 'spaghetti bowl' comercial. Ademas, la calidad (o profundidad) de los APC importa mas que la cantidad. Los acuerdos comerciales profundos, que abarcan temas y regulaciones domesticos, tienden a atraer mayores flujos de IED que los acuerdos superficiales.
Since the 1990s, preferential trade agreements (PTAs) have spread rapidly and widely throughout the world. At the time of writing, a total of 635 such agreements have been notified to [...]