constraints so that they can exercise their bargaining power. Frederick Abbott ( 2000 )
also examines a regional organization, NAFTA, from the perspective of legalization.
While AbbottWnds legalization an important strategy in the Americas, in Asia it has
gained little foothold for a variety of reasons surveyed by Miles Kahler ( 2000 ).
A number of hypotheses exist for explaining variation in legalization and formaliza-
tion across regions and issue-areas, but systematic empirical exploration of
these hypotheses is one of the signiWcant remaining challenges for scholars of IEIs.
The impact of domestic economic interests on regional trading arrangements,
and the relationship between the WTO and such arrangements, have also received
rigorous empirical scrutiny. Again, the balance between rule-based constraints and
the exercise of bargaining power informs these studies. MansWeld and Reinhardt
( 2003 ) argue that the growth of regional preferential trading arrangements (PTAs)
has in fact been driven by the dynamics of bargaining within the WTO. As each
round of WTO bargaining commences, states look to enhance their bargaining
power. Entering or establishing PTAs, which improve the ‘‘exit options’’ for their
members should WTO bargaining fail, is a mechanism by which states enhance
their leverage within the WTO. Kerry Chase ( 2003 ), focusing more on the domestic
level, insteadWnds that the primary forces driving the creation of a major PTA,
NAFTA, were the demands ofWrms with large economies of scale. These were the
Wrms that would beneWt the most from the creation of a PTA, and drove US policy
toward NAFTA through intense lobbying. Of course, this argument requires that
the economies of scale theseWrms face exist on a regional rather than global level;
otherwise, the same dynamic would lead theseWrms to push for more intense
WTO lobbying instead.
Issues of institutional design and its eVects have dominated studies of bargaining
and dispute resolution in international trade. One speciWc issue of institutional
design, across both global and regional institutions, is the conditions under which
states can ‘‘legally’’ evade trade rules, at least on a temporary basis. Downs, Rocke,
and Barsoom ( 1996 ) developed a general model of international cooperation in the
face of domestic political uncertainty that provides great insight into this problem.
When governments negotiate trade agreements, they know that they will face
political pressure to renege on these agreements. However, they do not know
with certainty how intense these pressures will be or from which sectors they will
come, because these pressures are subject to exogenous economic shocks and
shifting patterns of political mobilization. If unexpectedly intense demands to
renege emerge, governments mayWnd that they are better oVacceding to these
demands and withdrawing entirely from trade deals. However, if they were instead
allowed the option of temporarily backing out of their commitments in the face of
unusually high political pressures, the trade regime could survive and make all
better oVthan if these ‘‘pressure valves’’ did not exist. Thus, the authors argue that
a certain level of ‘‘optimal imperfection’’ should be observed in agreements that
have this political structure, including trade agreements.
664 lisa l. martin