The Impact of Domestic Political Factors on International Trade Negotiation Outcomes

This paper analyzes the effects of trade-related party preferences, parliamentary and presidential elections, and other domestic political variables on the outcome of bilateral trade agreement negotiations within a two-level game framework. This paper focuses on bilateral trade negotiations such as the Free Trade Agreements (or FTAs) of 34 countries. It conducts an empirical test on major FTAs with hypotheses driven from a literature review, from which two key findings are presented. First, domestic political factors such as the role of an election and the ruling party characteristics clearly affect the level of bilateral trade liberalization. Second, a country’s experience in signing, ratifying, and enforcing an FTA plays a significant role in moving a country toward a higher level of tariff liberalization. This paper included such factors as election events and ruling party characteristics as well as governmental experience and capabilities related to trade negotiations concerned. Moreover, this research first employed a share of short-term duty-free tariff lines as dependent variable instead of traditionally preferred variables of protection, such as tariff or other trade-related indices.