Cherry picking in the design of trade policy: why regional organizations shift between inter-regional and bilateral negotiations

Abstract

As states have established preferential trade agreements outside of the World Trade Organization over the past three decades, different designs have been developed: region-to-region, region-to-single state or state-to-state even if members belong to regional organizations. What accounts for this variation? Conventional approaches which focus on domestic politics provide no fully sufficient explanation for this variation. I argue that coherence within regional organizations, or a lack thereof, triggers design changes between inter-regional and bilateral. More specifically, I hypothesize that a lack of coherence within a region leads to the adoption of a bilateral design by the negotiation partner in situations where this partner competes with other states for a trade agreement with the same region. I test my argument on interactions of the European Union (EU) with regional organizations in Asia and Latin America by employing rigorous process-tracing and interviews with negotiation officials from all three regions. The findings show that the EU shifted from trade negotiations with these regional organizations to singling out member states when regional coherence faded. This was part of an attempt by the EU to advance commercial interests against its competitors China and the United States in these regions.