Preferential trading arrangements (PTAs) have spread widely over the past fifty years. During the same era, multilateral openness has grown to unprecedented heights, spurred by the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO). If the cornerstone of the manifestly successful multilateral regime is nondiscrimination, why have its members increasingly resorted to preferential liberalization? We argue that developments at the heart of GATT/WTO encourage its members to form PTAs as devices to obtain bargaining leverage within the multilateral regime. Specifically, the growth in GATT/WTO membership, the periodic multilateral trade negotiation rounds, as well as participation and, especially, losses in formal GATT/WTO disputes, have led its members to seek entrance into PTAs. Conducting the first statistical tests on the subject, we find strong evidence in support of this argument.

“The Rational Design of International Institutions” (special issue of IO, Autumn 2001) makes a significant contribution to the theoretical literature on international institutions. It is important, however, to recognize the limits of both the Rational Design project in its current form and the conclusions that can be drawn from the special issue about the project's usefulness and validity. This article evaluates the project on its own terms, as a rationalist attempt to explain variation in international institutions. I identify three significant sets of limitations: those of the scope of the project, those of the analytical framework, and those of the efforts that are made to evaluate the framework through empirical analysis. Although the first set of limitations is largely a matter of choice, the last two raise questions about how much of an advance the special issue in fact represents. Nevertheless, these shortcomings are not absolute—they can be remedied through further theoretical and empirical research.

This article examines lobbying in the United States on the North American Free Trade Agreement (NAFTA). I argue that economies of scale and production sharing across borders create incentives for firms to seek regional trade liberalization. Statistical analysis demonstrates that sectors with these characteristics were more likely to lobby for free trade in North America; these sectors were also exposed to free trade more rapidly under the tariff-phasing schedule in the NAFTA treaty. However, corporate restructuring to rescale production for the regional market and to increase offshore assembly presented adjustment costs for U.S. workers, which created divisions between labor unions and their employers. I conclude that regional arrangements are an attractive mechanism to liberalize trade for firms in need of larger-than-national markets to take advantage of economies of scale or to develop production-sharing networks.

Despite widespread recognition that aggregated summary statistics on international conflict and cooperation miss most of the complex interactions among nations, the vast majority of scholars continue to employ annual, quarterly, or (occasionally) monthly observations. Daily events data, coded from some of the huge volume of news stories produced by journalists, have not been used much for the past two decades. We offer some reason to change this practice, which we feel should lead to considerably increased use of these data. We address advances in event categorization schemes and software programs that automatically produce data by “reading” news stories without human coders. We design a method that makes it feasible, for the first time, to evaluate these programs when they are applied in areas with the particular characteristics of international conflict and cooperation data, namely event categories with highly unequal prevalences, and where rare events (such as highly conflictual actions) are of special interest. We use this rare events design to evaluate one existing program, and find it to be as good as trained human coders, but obviously far less expensive to use. For large-scale data collections, the program dominates human coding. Our new evaluative method should be of use in international relations, as well as more generally in the field of computational linguistics, for evaluating other automated information extraction tools. We believe that the data created by programs similar to the one we evaluated should see dramatically increased use in international relations research. To facilitate this process, we are releasing with this article data on 3.7 million international events, covering the entire world for the past decade.

Why do policymakers consistently employ economic sanctions even though scholars consider them an ineffective tool of statecraft? Game-theoretic models of economic coercion suggest the success rate may be understated because of selection effects. When the targeted country prefers conceding to incurring the cost of sanctions, it has an incentive to acquiesce before the imposition of sanctions. The bulk of successful coercion episodes should therefore end with sanctions threatened but not imposed. This contradicts the recent literature on sanctions, which assumes that sanctions rarely, if ever, work at generating significant concessions from the targeted country and are imposed for domestic or symbolic political reasons. If the game-theoretic argument is correct, the crucial cases to study are those in which coercion is threatened but not implemented. A statistical analysis of data on sanctions in pursuit of economic or regulatory goals strongly supports the gametheoretic argument. These results suggest that the significance of economic coercion has been undervalued in the study of statecraft and international relations more generally.

We reply to John Duffield's critique of the Rational Design project, a special issue of International Organization that explains the features of international institutions from a game-theoretic perspective. The project was deliberately limited to the analysis of explicit and observable institutional arrangements, and focused on the specific institutional properties of centralization, membership, scope, control, and flexibility. Its empirical contribution relies on case studies, but it is significantly amplified by the tight connections provided by a common theoretical perspective that is oriented toward testing a set of specific conjectures about institutional design. The results raise further issues of measurement and cross-case comparisons that provide valuable lessons for future work on institutional design. Although all of these research design choices are worth revisiting and questioning, as Duffield does, the initial results of the Rational Design project show that it provides a good basis from which to explore alternative research design decisions.

Does increased democracy promote or jeopardize foreign direct investment (FDI) inflows to less-developed countries? We argue that democratic institutions have conflicting effects on FDI inflows. On the one hand, democratic institutions hinder FDI inflows by limiting the oligopolistic or monopolistic behaviors of multinational enterprises, facilitating indigenous businesses' pursuit of protection from foreign capital, and constraining host governments' ability to offer generous financial and fiscal incentives to foreign investors. On the other hand, democratic institutions promote FDI inflows because they tend to ensure more credible property rights protection, reducing risks and transaction costs for foreign investors. Hence, the net effect of democracy on FDI inflows is contingent on the relative strength of these two competing forces. Our argument reconciles conflicting theoretical expectations in the existing literature. Empirical analyses of fifty-three developing countries from 1982 to 1995 substantiate our claims. We find that both property rights protection and democracy-related property rights protection encourage FDI inflows; after controlling for their positive effect through property rights protection, democratic institutions reduce FDI inflows. These results are robust against alternative model specifications, statistical estimators, and variable measurements.

In recent research on the 1934 Reciprocal Trade Agreements Act (RTAA), there has been no examination of the reaction of private actors to the RTAA. Did producer groups and investors in 1934 believe the Democratic RTAA was the solution to Republican protectionism, as institutional analyses of the RTAA claim, or did they realize the RTAA was no “magic bullet” against a return of protectionism, as skeptics argue? Archival data suggests that many producer groups believed the RTAA would result in durable liberalization, but that fewer understood the likely effects of its specific features. An event study of investor reaction to the RTAA reveals that export-dependent firms experienced a significant, positive stock return increase on news of the RTAA, while heavily tariff-protected firms experienced a significant stock decline, albeit several months later.

The proof for “War Is in the Error Term,” a piece that appeared in the Summer 1999 issue of International Organization, contains a subtle error. Once the correction is made, there are broader implications for testing theories of war using quantitative studies. Large-n tests to verify the incomplete information explanation for war will be more difficult to perform than originally anticipated.