New deals ‘The Second After Leaving?’ IO withdrawal and bilateral trade agreements
| Published date | 01 August 2023 |
| DOI | http://doi.org/10.1177/13691481221082454 |
| Author | Zorzeta Bakaki,Tobias Böhmelt |
| Date | 01 August 2023 |
| Subject Matter | Original Articles |
https://doi.org/10.1177/13691481221082454
The British Journal of Politics and
International Relations
2023, Vol. 25(3) 405 –422
© The Author(s) 2022
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DOI: 10.1177/13691481221082454
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New deals ‘The Second After
Leaving?’ IO withdrawal and
bilateral trade agreements
Zorzeta Bakaki and Tobias Böhmelt
Abstract
The Brexit campaign was based on the idea that newly gained British sovereignty and flexibility in
global trade governance would facilitate the quick negotiation of preferential trade agreements.
We explore how long it may take for a state to negotiate bilateral preferential trade agreements
to offset potential losses from International Organizations withdrawals. We address the question
of ‘timing’, and discuss several mechanisms that delay or speed up the implementation of
bilateral trade deals after exiting International Organizations. The empirical findings are based
on quantitative data and models accounting for the likely simultaneous relationship between
International Organizations exits and preferential trade agreements’ formation. We show that
leaving economic organisations significantly lowers the likelihood of subsequent preferential
trade agreements ratification. This effect wears out after about 1 year. This research has crucial
implications for our understanding of International Organizations, state benefits’ stemming from
their membership therein, bilateral trade deals, and international cooperation.
Keywords
bilateral trade agreements, International Organizations, preferential trade, withdrawal
Introduction
The former British Secretary of State for International Trade, Liam Fox, emphasised in
2017 that the United Kingdom could effortlessly replace and extend European Union
(EU) trade agreements once it left the Union because of the 2016 referendum. Specifically,
Mr Fox stressed that the United Kingdom ‘would easily be able to copy and paste all 40
of the EU’s external trade deals the second after midnight on Brexit day’,1 while ‘a post-
Brexit trade deal [with the EU] should be the easiest in human history’.2 He also insisted
that there will be numerous opportunities for more such agreements in the months after
leaving the world’s largest single market (Jackson and Shepotylo, 2018),3 making use of
the newly gained sovereignty in international trade governance, to ensure that the United
Department of Government, University of Essex, Colchester, UK
Corresponding author:
Zorzeta Bakaki, Department of Government, University of Essex, Wivenhoe Park, Colchester CO43SQ,
UK.
Email: zbakak@essex.ac.uk
1082454BPI0010.1177/13691481221082454The British Journal of Politics and International RelationsBakaki and Böhmelt
research-article2022
Original Article
406 The British Journal of Politics and International Relations 25(3)
Kingdom would not be deprived of economic prospects. However, the British govern-
ment has found it somewhat difficult to meet these expectations. Only four agreements
were concluded by February 2019 (with Switzerland, Chile, Eastern and Southern African
(ESA) countries, and the Faroe Islands, respectively). Towards the end of the transition
period in December 2020, in which the United Kingdom remained part of the common
market, only about half of the more than 40 European Union (EU) trade deals were rolled
over to 2021, while treaties signed with Canada and Japan were the only significant
agreements before a deal could be concluded with the EU on 24 December 2020.4
Moreover, there are only provisional applications or signed (but not ratified) treaties in
place for important EU contracts with, for example, Turkey,5 and a trade deal with the
United States is far from conclusion although it has been long promised.
A main reason behind the British government’s confidence in quickly replacing previ-
ous trade arrangements once it withdrew from the EU was the idea that existing treaties
could simply be rolled over (Allee and Elsig, 2019; Allee et al., 2016), while many states
would also find the newly gained British sovereignty and flexibility in international trade
attractive for (re-) negotiating terms. That said, the United Kingdom’s track record in
replacing old and securing new deals suggests that other mechanisms may be at work. For
instance, major trading powers such as Japan could have a little incentive to grant the
United Kingdom the same rules as the EU. While a comparison is tied to certain assump-
tions, it is estimated that although the UK-Japan trade agreement would increase gross
domestic product (GDP), growth will be lower by about £1.1 billion than the rise esti-
mated as a result of the EU-Japan Economic Partnership Agreement (£2.6 billion).6 In
addition, the time pressure the United Kingdom faces in the post-Brexit period likely
weakens its bargaining power considerably (Dür, 2008; Schneider, 2005; Wagner, 1988;
see also Carnevale and Lawler, 1986; Pruitt, 1981). While the case of Brexit and the UK
government’s efforts to replace previous arrangements with bilateral deals is just one
example, there may be a general pattern for leaving multilateral economic organisations
and seeking to establish preferential trade agreements (PTAs) instead as a compensation
for lost economic gains (Baccini, 2019; Mansfield et al., 2002; Mansfield and Milner,
2012).7 In fact, Borzyskowski and Vabulas (2019) document several withdrawals of
countries from major economic multilateral organisations since 1945, including the
General Agreement on Tariffs and Trade (GATT) or the World Bank. Although member-
ship in those International Organizations (IOs) does not impede countries from signing
bilateral PTAs and leaving them may be motivated by several reasons, states could have
incentives to address the economic losses stemming from IO withdrawal by creating
PTAs and reaping economic benefits through these. If there is a general pattern along
those lines, though, what are the underlying mechanisms that help explaining how IO
exits influence the formation of PTAs? And, if problems do arise from leaving IOs and
creating bilateral trade agreements, how long may the corresponding challenges persist?
In this context, we address the question of ‘timing’, namely how long it would take for a
government to restore, for example, reputation and bargaining power losses and success-
fully form bilateral PTAs to offset those losses.
Dür et al. (2014) define PTAs as any form of international agreement that can, in prin-
ciple, liberalise trade. For reasons outlined in the research design, we focus on bilateral
agreements only. To define international organisations, we follow Pevehouse et al. (2020:
494) in that institutions must be a formal entity, have at least three state members, and
there is a permanent secretariat or other indication of institutionalisation. Coordination
and collaboration through IOs (Gray et al., 2017; Pevehouse et al., 2020) can create
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