intra-industry trade, veto players, and the formation of
TRANSCRIPT
IntroductionTheory
MethodsResults
Supplemental
Intra-industry Trade, Veto Players, and theFormation of Preferential Trade Agreements
Timothy M. Peterson1 Cameron G. Thies2
1Department of Political ScienceOklahoma State University
2Department of Political ScienceUniversity of Iowa
International Political Economy Society, 2011 meeting
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Background
PTAs increasingly common
Yet, which states will form PTAs?
PTA formation as a competitive process
PTAs as building blocks or stumbling blocks
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Background
PTAs increasingly common
Yet, which states will form PTAs?
PTA formation as a competitive process
PTAs as building blocks or stumbling blocks
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Background
PTAs increasingly common
Yet, which states will form PTAs?
PTA formation as a competitive process
PTAs as building blocks or stumbling blocks
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Background
PTAs increasingly common
Yet, which states will form PTAs?
PTA formation as a competitive process
PTAs as building blocks or stumbling blocks
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Intra-industry trade and liberalization
Conventional wisdom: intra-industry trade reduces resistanceto liberalization (e.g., Balassa 1966; Aquino 1978)
However, intra-industry trade also has implications forcollective action (Gilligan 1997)
As such, when electoral interests reward narrow interests,intra-industry trade is associated with less liberalization (Kono2009)
But what about preferential liberalization?
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Intra-industry trade and liberalization
Conventional wisdom: intra-industry trade reduces resistanceto liberalization (e.g., Balassa 1966; Aquino 1978)
However, intra-industry trade also has implications forcollective action (Gilligan 1997)
As such, when electoral interests reward narrow interests,intra-industry trade is associated with less liberalization (Kono2009)
But what about preferential liberalization?
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Intra-industry trade and liberalization
Conventional wisdom: intra-industry trade reduces resistanceto liberalization (e.g., Balassa 1966; Aquino 1978)
However, intra-industry trade also has implications forcollective action (Gilligan 1997)
As such, when electoral interests reward narrow interests,intra-industry trade is associated with less liberalization (Kono2009)
But what about preferential liberalization?
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
BackgroundLiterature
Intra-industry trade and liberalization
Conventional wisdom: intra-industry trade reduces resistanceto liberalization (e.g., Balassa 1966; Aquino 1978)
However, intra-industry trade also has implications forcollective action (Gilligan 1997)
As such, when electoral interests reward narrow interests,intra-industry trade is associated with less liberalization (Kono2009)
But what about preferential liberalization?
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
ExpectationsHypothesis
Bilateral intra-industry trade and willingness to form PTAs
PTAs are less harmful when intra-industry trade is high
Gains from scaleImplications for relative productivityFirms less likely to be driven out of business throughpreferential liberalization
PTA formation bestows several benefits
Increased market powerPotential trade diversion
Non-participation in PTAs is costly
This relationship remains regardless of veto players
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
ExpectationsHypothesis
Bilateral intra-industry trade and willingness to form PTAs
PTAs are less harmful when intra-industry trade is high
Gains from scaleImplications for relative productivityFirms less likely to be driven out of business throughpreferential liberalization
PTA formation bestows several benefits
Increased market powerPotential trade diversion
Non-participation in PTAs is costly
This relationship remains regardless of veto players
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
ExpectationsHypothesis
Bilateral intra-industry trade and willingness to form PTAs
PTAs are less harmful when intra-industry trade is high
Gains from scaleImplications for relative productivityFirms less likely to be driven out of business throughpreferential liberalization
PTA formation bestows several benefits
Increased market powerPotential trade diversion
Non-participation in PTAs is costly
This relationship remains regardless of veto players
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
ExpectationsHypothesis
Bilateral intra-industry trade and willingness to form PTAs
PTAs are less harmful when intra-industry trade is high
Gains from scaleImplications for relative productivityFirms less likely to be driven out of business throughpreferential liberalization
PTA formation bestows several benefits
Increased market powerPotential trade diversion
Non-participation in PTAs is costly
This relationship remains regardless of veto players
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
ExpectationsHypothesis
Bilateral intra-industry trade and willingness to form PTAs
PTAs are less harmful when intra-industry trade is high
Gains from scaleImplications for relative productivityFirms less likely to be driven out of business throughpreferential liberalization
PTA formation bestows several benefits
Increased market powerPotential trade diversion
Non-participation in PTAs is costly
This relationship remains regardless of veto players
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
ExpectationsHypothesis
Bilateral intra-industry trade and willingness to form PTAs
PTAs are less harmful when intra-industry trade is high
Gains from scaleImplications for relative productivityFirms less likely to be driven out of business throughpreferential liberalization
PTA formation bestows several benefits
Increased market powerPotential trade diversion
Non-participation in PTAs is costly
This relationship remains regardless of veto players
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
ExpectationsHypothesis
Hypothesis
A higher proportion of intra-industry trade is associated with ahigher likelihood of PTA formation, regardless of the extent of vetoplayers
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Data
PTA and veto player data from Mansfield, Milner, andPevehouse (2007)
PTA, FTA, and CU data from 1951 to 2000Veto player measure captures government branches andpartisan composition thereof
Intra-industry trade measure calculated with commodity-leveldata from Feenstra et al. (2005)
Standard International Trade Classification (SITC) 4-digit leveldata
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Data
PTA and veto player data from Mansfield, Milner, andPevehouse (2007)
PTA, FTA, and CU data from 1951 to 2000
Veto player measure captures government branches andpartisan composition thereof
Intra-industry trade measure calculated with commodity-leveldata from Feenstra et al. (2005)
Standard International Trade Classification (SITC) 4-digit leveldata
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Data
PTA and veto player data from Mansfield, Milner, andPevehouse (2007)
PTA, FTA, and CU data from 1951 to 2000Veto player measure captures government branches andpartisan composition thereof
Intra-industry trade measure calculated with commodity-leveldata from Feenstra et al. (2005)
Standard International Trade Classification (SITC) 4-digit leveldata
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Data
PTA and veto player data from Mansfield, Milner, andPevehouse (2007)
PTA, FTA, and CU data from 1951 to 2000Veto player measure captures government branches andpartisan composition thereof
Intra-industry trade measure calculated with commodity-leveldata from Feenstra et al. (2005)
Standard International Trade Classification (SITC) 4-digit leveldata
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Data
PTA and veto player data from Mansfield, Milner, andPevehouse (2007)
PTA, FTA, and CU data from 1951 to 2000Veto player measure captures government branches andpartisan composition thereof
Intra-industry trade measure calculated with commodity-leveldata from Feenstra et al. (2005)
Standard International Trade Classification (SITC) 4-digit leveldata
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Statistical models
Unit of analysis: dyad-year, 1962-2000
Dependent variable: PTA signing
Statistical model: rare events logit (King and Zeng 2001) withcorrections for duration dependence and non-independence bydyad
Primary explanatory variables: intra-industry trade index,higher veto players (interacted)
Controls: third party PTAs, trade levels, development, majorpower status, alliance, conflict history, GATT/WTOmembership, distance, European dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Statistical models
Unit of analysis: dyad-year, 1962-2000
Dependent variable: PTA signing
Statistical model: rare events logit (King and Zeng 2001) withcorrections for duration dependence and non-independence bydyad
Primary explanatory variables: intra-industry trade index,higher veto players (interacted)
Controls: third party PTAs, trade levels, development, majorpower status, alliance, conflict history, GATT/WTOmembership, distance, European dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Statistical models
Unit of analysis: dyad-year, 1962-2000
Dependent variable: PTA signing
Statistical model: rare events logit (King and Zeng 2001) withcorrections for duration dependence and non-independence bydyad
Primary explanatory variables: intra-industry trade index,higher veto players (interacted)
Controls: third party PTAs, trade levels, development, majorpower status, alliance, conflict history, GATT/WTOmembership, distance, European dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Statistical models
Unit of analysis: dyad-year, 1962-2000
Dependent variable: PTA signing
Statistical model: rare events logit (King and Zeng 2001) withcorrections for duration dependence and non-independence bydyad
Primary explanatory variables: intra-industry trade index,higher veto players (interacted)
Controls: third party PTAs, trade levels, development, majorpower status, alliance, conflict history, GATT/WTOmembership, distance, European dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
DataModels
Statistical models
Unit of analysis: dyad-year, 1962-2000
Dependent variable: PTA signing
Statistical model: rare events logit (King and Zeng 2001) withcorrections for duration dependence and non-independence bydyad
Primary explanatory variables: intra-industry trade index,higher veto players (interacted)
Controls: third party PTAs, trade levels, development, majorpower status, alliance, conflict history, GATT/WTOmembership, distance, European dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
TableFigureDiscussion
ResultsAbbreviated table for intra-industry trade, veto players, and PTA formation
All PTAs FTAs, CUs, CMs only CUs, CMs onlyModel 1 Model 2 Model 3 Model 4 Model 5 Model 6
Intra-industry trade index 1.527** 1.710* 1.854*** 2.092** 3.713*** 3.040***(0.478) (0.705) (0.433) (0.699) (0.365) (0.597)
Higher veto players -2.536*** -2.525*** -2.453*** -2.438*** -3.230*** -3.327***(0.244) (0.249) (0.255) (0.261) (0.353) (0.366)
IIT X higher veto players -0.432 -0.581 2.527(1.536) (1.492) (1.413)
Third-party PTAs 0.295*** 0.295*** 0.346*** 0.346*** 0.039 0.038(0.048) (0.048) (0.054) (0.054) (0.049) (0.049)
Lower dependence -20.044 -19.658 -32.249*** -31.712*** -28.271** -33.265***(10.778) (11.049) (9.564) (9.503) (8.943) (9.405)
Lower GDP -0.219*** -0.219*** -0.222*** -0.222*** -0.285*** -0.291***(0.029) (0.029) (0.030) (0.030) (0.039) (0.039)
Lower polity score 0.068*** 0.068*** 0.065*** 0.065*** 0.067*** 0.066***(0.007) (0.007) (0.007) (0.007) (0.009) (0.009)
Alliance 1.876*** 1.875*** 1.858*** 1.858*** 2.065*** 2.064***(0.087) (0.087) (0.091) (0.091) (0.112) (0.112)
Both in GATT/WTO 0.242** 0.243** 0.318*** 0.319*** 0.497*** 0.494***(0.079) (0.079) (0.082) (0.082) (0.103) (0.103)
ln Distance -0.199*** -0.198*** -0.204*** -0.204*** -0.187*** -0.189***(0.012) (0.012) (0.013) (0.013) (0.015) (0.015)
European dyad 0.282* 0.283* 0.341** 0.342** 0.231 0.208(0.119) (0.119) (0.119) (0.119) (0.145) (0.146)
Observations 173,724 173,724 173,724 173,724 173,724 173,724*** p≤0.001, ** p≤0.01, * p≤0.05; two-tailed testStandard errors clustered on the dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
TableFigureDiscussion
Interaction effects
−4
−2
02
46
marg
inal effect of
intr
a−
industr
y tra
de
.1 .2 .3 .4 .5higher veto players
All PTAs
−4
−2
02
46
.1 .2 .3 .4 .5higher veto players
FTAs+
−4
−2
02
46
.1 .2 .3 .4 .5higher veto players
CUs+
−4
−2
02
46
marg
inal effect of
hig
her
veto
pla
yers
0 .02 .04 .06 .08intra−industry trade
All PTAs
−4
−2
02
46
0 .02 .04 .06 .08intra−industry trade
FTAs+
−4
−2
02
46
0 .02 .04 .06 .08intra−industry trade
CUs+
with 95% confidence bounds
Marginal effects of intra−industry trade and higher veto players
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
TableFigureDiscussion
Implications of our findings
Preferences and institutions appear to influence PTAformation
Implications for the structure of trade within and betweenPTAs
Implications for cooperation and conflict
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
TableFigureDiscussion
Implications of our findings
Preferences and institutions appear to influence PTAformation
Implications for the structure of trade within and betweenPTAs
Implications for cooperation and conflict
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
TableFigureDiscussion
Implications of our findings
Preferences and institutions appear to influence PTAformation
Implications for the structure of trade within and betweenPTAs
Implications for cooperation and conflict
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
Full table (part 1) for intra-industry trade, veto players, and PTA formationAll PTAs FTAs, CUs, CMs only CUs, CMs only
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6Intra-industry trade index 1.527** 1.710* 1.854*** 2.092** 3.713*** 3.040***
(0.478) (0.705) (0.433) (0.699) (0.365) (0.597)Higher veto players -2.536*** -2.525*** -2.453*** -2.438*** -3.230*** -3.327***
(0.244) (0.249) (0.255) (0.261) (0.353) (0.366)IIT X higher veto players -0.432 -0.581 2.527
(1.536) (1.492) (1.413)Third-party PTAs 0.295*** 0.295*** 0.346*** 0.346*** 0.039 0.038
(0.048) (0.048) (0.054) (0.054) (0.049) (0.049)Lower dependence -20.044 -19.658 -32.249*** -31.712*** -28.271** -33.265***
(10.778) (11.049) (9.564) (9.503) (8.943) (9.405)Lower GDP -0.219*** -0.219*** -0.222*** -0.222*** -0.285*** -0.291***
(0.029) (0.029) (0.030) (0.030) (0.039) (0.039)One major power -1.126*** -1.125*** -1.124*** -1.122*** -1.094*** -1.126***
(0.143) (0.144) (0.146) (0.146) (0.188) (0.189)Two major powers -1.405 -1.413 -1.301 -1.311 -0.865 -0.857
(0.859) (0.858) (0.878) (0.876) (0.654) (0.659)Lower polity score 0.068*** 0.068*** 0.065*** 0.065*** 0.067*** 0.066***
(0.007) (0.007) (0.007) (0.007) (0.009) (0.009)Observations 173,724 173,724 173,724 173,724 173,724 173,724*** p≤0.001, ** p≤0.01, * p≤0.05; two-tailed testStandard errors clustered on the dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
Full table (part 2) for intra-industry trade, veto players, and PTA formationAll PTAs FTAs, CUs, CMs only CUs, CMs only
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6Alliance 1.876*** 1.875*** 1.858*** 1.858*** 2.065*** 2.064***
(0.087) (0.087) (0.091) (0.091) (0.112) (0.112)MID -0.228 -0.227 -0.159 -0.158 -0.386 -0.385
(0.291) (0.291) (0.293) (0.293) (0.383) (0.382)Both in GATT/WTO 0.242** 0.243** 0.318*** 0.319*** 0.497*** 0.494***
(0.079) (0.079) (0.082) (0.082) (0.103) (0.103)ln Distance -0.199*** -0.198*** -0.204*** -0.204*** -0.187*** -0.189***
(0.012) (0.012) (0.013) (0.013) (0.015) (0.015)European dyad 0.282* 0.283* 0.341** 0.342** 0.231 0.208
(0.119) (0.119) (0.119) (0.119) (0.145) (0.146)Time since onset 0.057** 0.057** 0.049* 0.049* -0.006 -0.007
(0.021) (0.021) (0.022) (0.022) (0.029) (0.029)
Time since onset2 -0.005*** -0.005*** -0.005*** -0.005*** 0.001 0.001(0.001) (0.001) (0.001) (0.001) (0.002) (0.002)
Time since onset3 0.000*** 0.000*** 0.000*** 0.000*** -0.000 -0.000(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Constant -1.856** -1.866*** -2.248*** -2.263*** 0.376 0.505(0.565) (0.566) (0.601) (0.604) (0.661) (0.669)
Observations 173,724 173,724 173,724 173,724 173,724 173,724*** p≤0.001, ** p≤0.01, * p≤0.05; two-tailed testStandard errors clustered on the dyad
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs
IntroductionTheory
MethodsResults
Supplemental
Intra-industry trade calculation
Commodity-level measure:
Gk∗ij = 1−
|X k∗ij − X k∗
ji |
X k∗ij + X k∗
ji
Correction for trade imbalances:
X k∗ij =
1
2
[(Xi + Mi )
2Xi
+
(Xj + Mj
)2Mj
]∗ X k
ij
X k∗ji =
1
2
[ (Xj + Mj
)2Xj
+(Xi + Mi )
2Mi
]∗ X k
ji
Dyad-year level measure:
Gij =n∑
k=1
Gk∗ij ∗
X kij + X k
ji
Xij + Xji
Peterson and Thies Intra-industry Trade, Veto Players, and PTAs