Proliferation of PTAS and EU trade policy: variations in the design of regulatory cooperation mechanisms in CETA

Regulatory cooperation plays an increasing part in the European externalization strategy. This research aims for increasing the understanding of this phenomenon by providing a typology of different regulatory schemes used within trade agreements. While past research focused on legal design variation across trade agreements, this thesis concentrates its efforts on legal design variation intra-agreement, specifically variation between regulatory sectors. In a recent addition to the European trade network, the EU and Canada presented the Comprehensive and Economic Trade Agreement (CETA) as the “gold standard” for the new generation of trade agreements. This thesis thus looks at this referential treaty and attempts to answer the following question: What are the different types of regulatory design within CETA, and how can the variation in types across regulatory sectors be explained? Based on the literature on international legalization I propose two dimensions of “regulatory design”: nature of obligation (Hard/Soft) and mode of decision (Ex-ante/Ex-post). This typology establishes four design types that describe the different possible regulatory schemes: Type 1 (Ex-Ante/Hard); Type 2 (Ex-Post/Hard); Type 3 (Ex-Ante/Soft); Type 4 (Ex-post/Soft). Through reviewing CETA, I identify 7 regulatory sectors institutionalized within CETA according the four mentioned types: Biotechnology, Forest products, Geographical Indications, Motor Vehicles, Pharmaceutical Products, Professional Qualifications, Raw Materials. To explain the negotiation processes resulting in the choice of design types, I mobilize a Rational Institutionalist framework following the premises of the Rational Design research agenda. I develop an explanatory framework based on a structural understanding of the negotiating process. This structure is composed by two interdependence risks affecting the results of the negotiation and thus the design type : High/Low risk of “hold-up” and High/Low risk of shirking. The risk of “hold-up” refers to the possible future re-negotiation of the terms of the agreement and its consequences. It poses that the mutual economic integration resulting from cooperation could make such re-negotiation particularly damage for vulnerable parties. Shirking relates to the literature on enforcement and non-compliance issues. It looks at the possible defection by one party from its legal obligations and to the possibility that a party might opportunistically use pre-existing or existing regulatory divergences to create additional barriers to trade. This thesis posits that when a risk of hold-up is High, negotiators will use an Ex-ante design, which limits in time cooperation and reduces future “hostage” situations. If this risk is Low, negotiating parties will commit to an Ex-post design. A high level of shirking risk results instead in the use of Hard obligation with the aim of reducing the possible risk of avoidance of legal commitments. At the opposite, when such a risk is low, parties will rather use Soft obligation to design their cooperation. To explain the variation of design types, three hypotheses are formulated: Type 1 is caused by High “hold-up” and High shirking risks, Type 2 by Low “hold-up” but High shirking, Type 3 by High “Hold-up” but Low shirking, and Type 4 by Low “Hold-up” and Low shirking. The results support the four hypotheses for six sectors out of seven, Biotech being a deviant case. Type 3 is indirectly verified as it is absent from CETA and no sectors with its related results could be found. For empirical testing, a qualitative multi-method approach was adopted. Two methods of comparison were combined: across-case and within-case. The empirical analysis is thus divided in two parts, the first one compares all seven sectors, while the second uses process-tracing for each sector. In terms of data, different sources are harnessed: trade statistics from Eurostat, regulatory documents and position papers. I also interviewed 24 European and Canadian organizations either representing industry or public authorities.