Theory and methodology

This chapter first provides a theoretical framework. It then advances some alternative explanations. Next, it proposes a methodology for the empirical analysis conducted in later chapters. Theoretically, this study advances a new theory to explain the relationship between societal actors and executives involved in trade policy-making on social issues across various institutional settings and to trace the effects of labor and environmental standards in trade agreement partners. Methodologically, it is a novel attempt to analyze social issues in PTAs qualitatively, focusing on the causal processes behind their design and implementation.

Theoretical framework

I begin by outlining the political dynamic of social standards’ inclusion in trade agreements, adopting an open economy politics (OEP) approach and explaining how it differs from traditional trade issues. I then conceptualize the origins of key actors’ preferences. Next, I offer a principal-agent theory, explaining the making of PTAs' social provisions, and introduce the first hypothesis to be tested in Chapters 4 and 5. Finally, I outline the logic of the second hypothesis to be tested in Chapter 6.

The politics of social standards in PTAs: traditional vs. new trade issues

Even if the rapid signing of bilateral PTAs is largely driven by international systemic factors, such as geo-economic competition between the EU and the U.S. and the goal of achieving bargaining leverage in the multilateral trading system (e.g., Mansfield and Reinhardt 2003; Sbragia 2010), these factors do not account for the variation in PTA design, including the design of social provisions. Thus, the main contention here is that in order to explain variation between social provisions in EU and U.S. PTAs, we need to have a clear picture of the causal links between domestic political factors and their effects on PTA design, including variation in social standards. This contention echoes other studies of PTA formation that highlight the importance of domestic political and economic factors, such as investors' interests and veto players (e.g.. Manger 2009; Milner and Mansfield 2012).

To understand the effects of these domestic factors, I rely on an OEP approach (Lake 2009), viewing trade policy outcomes as a function of societal interests, domestic political institutions, and international bargaining. OEP is a popular approach among scholars of IPE. It derives actors’ interests over economic policies from their position within the international economy, relies on economic theories of preference formation, analyses how those interests are aggregated through domestic institutions, and looks at how interstate bargaining shapes final policy outcomes. IPE scholarship on the politics of international trade has long argued that attention to all three factors is needed to understand trade policy outcomes (e.g., Milner 1999). This study utilizes this widely accepted framework for the analysis of the outcomes of interest here, viewing the design of social standards as a function of actors’ interests, domestic institutions, and agreement partners' negotiating power. However, while maintaining this general framework, I expect that the political dynamic in non-trade issue areas will be different from traditional international trade matters, such as trade liberalization through the removal of tariffs, which can be gauged from the typology offered in the previous chapter (Young 2007).

First, unlike traditional trade issues, social provisions are characterized by less severe distributional conflicts for certain domestic groups because material gains and losses are diffused and spread across multiple constituencies, especially concerning the environment, but less so for labor, which represents a factor of production. This, in turn, can affect the intensity of actors' preferences. For example, while business and labor represent factors of production with a rather clear view of prospective gains and losses from engaging in trade, advocates of environmental provisions can belong to various segments of society united by similar values. Moreover, unlike in trade liberalization, where such gains and losses are material in nature, reducing or increasing the welfare of different actors in a predictable way, in new trade matters, societal preferences can also be dictated by normative concerns, such as the wrongness of child labor. Such value-driven stakes can affect the intensity of societal preferences over certain issues in trade, as well as their political mobilization.

Second, the beneficiaries of social provisions in trade agreements can come from various factors of production and industrial sectors and are, therefore, less organized than the traditional winners and losers of trade liberalization. In addition to firms interested in cheap labor and lax environmental regulations and labor unions and environmental NGOs fearing social dumping and environmental damage, social issues in trade mobilize other actors, such as various NGOs and officials from non-trade ministries. Together, they can often be perceived as loosely organized communities connected by their normative vision of the appropriateness of regulating certain aspects of international trade, rather than its material consequences. The collective action problem they face when trying to influence the agreement agenda is potentially greater. For example, NGOs trying to advocate the enforcement of core labor rights in PTAs will have fewer resources at their disposal to lobby negotiators than well-organized business interests. The success of their attempts to influence the policy process will depend on the kind of mobilization strategies they use, such as issue framing, for example, apart from traditional lobbying of governmental actors. Furthermore, executives negotiating trade agreements will have more room to maneuver when the interests of their domestic constituents are diffuse and are able to act in accordance with their own preferences that might be driven by various rationales, such as ideology and bureaucratic power augmentation.

Third, like in traditional trade policy, domestic institutions also aggregate societal preferences with respect to non-trade issues. They can either lessen the collective action problem faced by domestic groups trying to influence the agreement agenda, for example, by providing more channels for labor and environmental activists to make their concerns heard by policy-makers, or make it greater when such channels are not easily accessible. For instance, the multi-level structure of the EU might have different effects on actors' strategies in terms of supplying multiple lobbying venues and access points to them (national and supranational) but also makes their efforts less effective by increasing the number of policy-makers they need to target. Supranational EU officials might also be more immune from societal actors' pressures than their national-level counterparts in the U.S.

In sum, actors' preferences channeled through domestic institutions are responsible for the shape of social provisions in PTAs, just like in the case of traditional trade policy concerned with tariff removal. Thus, I expect that variation between the design of social provisions in EU and U.S. PTAs stems from the distinct patterns of the relationships between interests groups and trade policy-makers in the EU and the U.S.¹ Yet, the nature of societal preferences and the way in which they are translated through domestic institutions might differ in the case of social standards.