Attakrit Patchimnan, Ph.D.

1. Political Economy of Democratic Transition and Optimal Cooperative Design The Case Study of Gravity model-FTA Attakrit Patchimnan, Ph.D.

2. Democratization and Interstate Cooperation The Effects of Regime Type on the Establishment of Trade Agreements, Trade Policies, and the links between Democracy and Foreign Policy.

3. EMPIRICAL EVIDENCEs

4. Average AFTA/CEPT Rates Source: ASEAN Secretariat

5. Current State of Play with the CEPT(Common Effective Preferential Tariff) , Sources : CENTER FOR INTERNATIONAL ECONOMICS CEPT 2000

6. APEC Russian federation NAFTA SAPA Canada Taiwan Province of China AFTA 10 Nepal Bhutan Maldives Pakistan United States Japan AFTA6 Brunei Darussalam Indonesia Malaysia Mexico Sri Lanka Philippines Singapore Korea Peru India Bangladesh Thailand China Chile Hong Kong SAR TPSEPA Vietnam Papua New Guinea Australia New Zealand CER Lao PDR Myanmar Note: : Bilateral trade agreement : Regional trade agreement ASEAN free trade agreement (AFTA) The Increasing Problems of Cooperation in ASEAN 10 Asymmetric levels of economic development. The divergence of trade liberalization, macroeconomic policies, and policy choices caused by internal and external shocks. Divergence of mixed political regime types The problems of collective actions caused by ineffective collaboration and coordination. Cambodia Sources : IMF

7. Degree of Export Dependence in ASEAN free trade area (1993-1996) Social Networks

8. Trend of Political Regime Type (1962-2002) Source: Polity IV Data Set- point measure of democracy and autocracy, if REG ≥ 6 , democracy and REG ≤-6 autocracy, and -5 to +5 are considered "incoherent polities" that are highly associated with regime instability and volatility

9. Empirical Perspectives of Democratic Transition and interstate Cooperation • Remmer (1998) asserts, The process of democratization that began in the late 1970s was followed by a dramatic resurgence of cooperative endeavors, including the revitalization of the Central American Common Market, as well as the creation of new vehicles for interstate cooperation, notably NAFTA. (p.26) Source: Remmer, K.L. (1998). The politics of neo-liberal economic reform in South America, 1980-1994, Studies in Comparative International Development, 33(2), 3-29. • Mansfield, Milner, and Rosendorff (2002) assert, The regime type of states can strongly affect their propensity to cooperate on economic issues and more democratic countries have displayed a greater likelihood of concluding trade agreement than other countries, even when holding constant various political and economic influences .(p.505) Democratic countries are about twice as likely to form a PTA as autocratic countries, and that pairs of democracies are roughly four times as likely to do so as autocratic pairs. These results provide strong evidence that democracies are more commercially cooperative than other countries. (p. 481) Source: Mansfield D. E, Milner V. H, Rosendorff B. P. (Summer, 2002). Why democracies cooperate more: electoral control and international trade agreements. International Organization, 56(3), 477-513. The regime type serves as an international economic cooperation

10. Literature Review Edward D. Mansfield; Helen V. Milner; B. Peter Rosendorff (2000) test the hypothesis on bilateral trade flows with gravity model from 1960-1985/ 1990, N=30480 observations. (in-outside, Second Image Theory) The Result of Study 1) The results of an empirical analysis based on the period 1960-1985/1990 are consistent with the these predictions. 2) Holding constant various economic and political factors, democratic dyads tend to trade more freely than dyad composed of a democracy and an autocracy. • Demo+Auto 15-20% less commerce than a dyad composed of two Demo. from1960-1985. • Demo+Auto 40% less commerce than a dyad composed of two Demo by 1990. Source: Edward D. Mansfield; Helen V. Milner; B. Peter Rosendorff (2000). Free to Trade: Democracies, Autocracies, and International Trade. The American Political Science Review, 94(2), 305-321. Xinyuan Dai (2002) highlights some problematic aspects of MMR’s analysis. The Result of Study 1) He recalculates the aggregate trade barriers and concludes that no clear comparison can be drawn without considering the preference of decision makers that go into the institutions. Source: Dai X. (2002)Political Regime and International Trade: Democratic difference Revisited. the American Political Science Review, 96(1), 159-165).

11. The MMR Model Three main Assumptions for MMR Model The shocks on the world prices and the establishment of protection level represents an imperfect information. Domestic shocks have no impacts on world prices since the model assumes countries are small opening economies. The voters might become aware of the domestic prices affected by both the shocks to world prices and poor economic performance. (the interstate conflicts or violations of trade agreements on commercial issues) The four factors that determines the MMR model Functions of the economy The polity Conditions of political regime type The executive’s optimal level of trade protection in order to explain the trade preference of voters and government. The Function of Government’s Maximized Level of Import Tariff Settings

12. t t* 1 tm =t0 _ (Ideal voters) t t’(Chosen by incumbents) ~ ^ U Um _ U Leviathan strategy Figure 1. The best response functions Nash Equilibrium Sources: Mansfield D. E.; Milner V. H.; Rosendorff B. P. (Summer, 2002). Why democracies cooperate more: electoral control and international trade agreements. International Organization, 56(3), p. 486.

13. The Results of MMR Model Sources: Mansfield D. E.; Milner V. H.; Rosendorff B. P. (Summer, 2002). Why democracies cooperate more: electoral control and international trade agreements. International Organization, 56(3), 477-513.

14. Methodology The data for our test are drawn from a wide range of World Bank, UN COMTRADE, International Monetary Fund (IMF), Polity IV, International Financial Statistics (IFS), and Industry Trade Data. The data of bilateral trade in SITC REV.3(manufactured goods-labor intensive sectors) from ASEAN-5’s major trade partners, such as, Malaysia, Philippines, Indonesia Singapore, and Thailand, from 1993-2005. The panel data analysis (cross section and time-series method) because the advantages of this method are that panels can capture all relevant relationships among independent and dependent variables over time, and monitor unobservable bilateral-trade-pairs’ individual effects. Disputes ij is not included in this inquiry because there is no relationship of disputes in terms of military conflicts The objective of Analysis Hypothesis: the increased probability of interstate cooperation under either RTAij or WTOij is caused by the rising democratic levels. The Concept of Neoliberal Intuitionalists (International Institutions).

15. Model I: A Regression model of RTAij (Regional Trade Agreement) RTAij = 0 + 1 GDP i+ 2 GDP j + 3 CHECK &BALANCE i + 4 CHECK &BALANCE j +5 REG i +6 REG j + 7 POLARIZATION i +8 POLARIZATION j + 9 DISTANCE ij+ 10 POPULATION i+ 11POPULATION j + ij Model II: A Regression model of WTOij (World Trade Organization) WTO ij = 0 + 1 GDP i+ 2 GDP j + 3GDP i+ 4 GDP j+5 REG i +6 REG j + 7 DISTANCE ij+ 8 LANGUAGEij+ 9 CONTIGUITY ij+10 PAR_COM i +11PAR_COM j + 12 CHECK &BALANCE i + 13 CHECK &BALANCE j+ 14 DISTANCE ij+ 15 POPULATION i+ 16 POPULATION j + ij Data Descriptions RTAij = the variable equals 1 if country i and j participate in interstate cooperation or trade liberalization of RTA in year t, and 0 otherwise. GDPi (GDPj) = Gross Domestic Product of country i (j) in year t, (Size of State) GDP i ( GDPj) = the changes in the GDP of i and jfrom year t - 1 to t, (Downturns in the business cycle) REG i (REGj) = DEMOC – AUTOC in year t,* LANGUAGE ij = this variable equals 1 if country i and country j use the same language in year t, and 0 otherwise, POLARIZATION i (POLARIZATION j) = this variable equals 1 if i or j consists of polarization in year t and 0 otherwise, DISTANCEij = distance between country i and country j in year t, CONTIGUITYij = this variable equal 1 if country i and country j share the same border in year t, and 0 otherwise, PARCOM i (PARCOM j) = point measure of level of competitiveness of participation (0-10) in year t, POLCOM i (POLCOM j) = point measure of level of political competition (0-5) in year t, CHECK &BALANCE i (CHECK &BALANCE j) = the point measure of level of stability and check& balance (0-5) in year t, WTO ij = the variable equals 1 if country i and j participate in interstate cooperation of WTO, (country i) and country j in year t, and 0 otherwise. ij = error term

16. Table 2.1: Results of Binary Probit Models with Panel Data (RTA ij)

17. Table 2.2: Results of Binary Probit Models with Panel Data (WTOij) Notes Titles: Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

18. Concluding Remarks

19. Thank You