What explains the variations in escape clauses in trade agreements?

This paper examines how agricultural support affects the design of preferential trade agreements (PTAs).

I hypothesize that democratic institutions that over-represent rural interests create incentives for leaders to negotiate flexible trade agreements to respond to the concerns of their agricultural constituents.

Flexible design of treaties enables members to shirk their contractual duties temporarily and can be often used as protectionist measures.

To validate this argument, I construct a measure of flexibility using a Bayesian item response theory that treats flexibility as a latent characteristic of trade agreements.

With this index and panel data covering 648 PTAs signed from 1948-2017, I find that political leaders are more likely to introduce flexibility provisions when entering into trade agreements as they confer more agricultural subsidies to farmers.

Instrumental variables regression indicates that most of the effect of agricultural subsidies on flexibility provisions is attributable to rural malapportionment.

In addition to providing a continuous index to measure PTA flexibility, the paper introduces a robust predictor of trade agreement flexibility that has been overlooked in previous work.