Trade, conflicts and political integration: explaining the heterogeneity of regional trade agreements

This paper investigates the determinants of the shape of regional trade agreements (RTAs). Because the world is constituted by independent political entities, international trade flows take place in a system where property rights are unsecured and RTAs should be understood as regulation mechanisms. In this theoretical framework, trade and security issues interact in the formation of RTAs, so that their determinants differ according to their level of political integration, defined by their ability to promote the negotiated settlement of conflicts. Empirical results confirm that countries more subject to interstate disputes and naturally more opened to trade are more likely to create politically integrated regional agreements, such as common markets or custom unions. On the contrary, international insecurity deters less integrated agreements implying a weak institutional framework, such as preferential or free trade agreements.