Why Breakup? Looking into Unsuccessful Free Trade Agreement Negotiations

Discussion Papers

No.697

by Shintaro Hamanaka

February 2018

ABSTRACT

In this first attempt to systematically analyze both successful and unsuccessful free trade agreement (FTA) negotiations, we differentiate between country pairs that initiated negotiations but did not reach conclusion from pairs that did not initiate negotiations, though previous studies treat the two groups equally as “absence of FTA”. By comparing successful and unsuccessful negotiations, certain factors associated that may affect the negotiation outcomes are revealed. We examined three factors associated with negotiations: (i) the existence of a diplomatic mission in negotiating partners; (ii) reciprocity of tariff cut under free trade agreements; and (iii) the number of negotiations conducted in parallel by one country. While our sample size is smallonly 25 free trade agreement negotiations were conducted by Singapore (17 successful and 8 unsuccessful cases)the following can be asserted based on comparison between the two groups. First, when negotiating parties have diplomatic missions in the partner country, they are more likely to conclude free trade agreement negotiations between the two. Second, when the level of “most favored nation (MFN)” rates between negotiating parties are similar, they are more likely to conclude FTA negotiations between the two. Finally, when one country conducts multiple parallel free trade agreement negotiations, the (less important) early-comer negotiating partners may be crowded by a new, more important negotiating partner.

Keywords:  FTA, negotiations, mediations, unsuccessful negotiations, determinants of FTAs

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.