Regime Type and International Commercial AgreementsPreferential Trade Agreements (Ptas) and Bilateral Investment Treaties (Bits) • August 21st, 2014
Preferential Trade Agreements (PTAs) and Bilateral Investment Treaties (BITs) limit member- states’ policy discretion; consequently policy uncertainty is mitigated. Reductions in policy un- certainty stemming from accession to an International Agreement (IA) improves the resource allocation decisions of the voters and reduces deadweight losses from the need to self-insure against policy uncertainty. If electoral accountability makes expropriation of assets or discrimi- natory treatment of firms more costly to leaders (whereas electoral accountability has little effect on rent creation via tariff revenues) then among developing countries, democratic states sign PTAs relatively more frequently than autocratic states; however autocratic states are more likely to sign BITs than are democratic states. We offer a simple model, and present some empirical regularities consistent with the theory.
