© Koninklijke Brill NV, Leiden, 2007 DOI: 10.1163/138234007X240718 Th e Institutional Choice of Bilateralism and Multilateralism in International Trade and Taxation Th omas Rixen * Ingo Rohlﬁng ** Jacobs University, Collaborative Research Center “Transformations of the State,” School of Humanities and Social Sciences, P.O. Box 750 561, 28725 Bremen, Germany (Email: email@example.com; rohlﬁng@wiso-unikoeln.de) Received 17 October 2006; accepted 16 March 2007 Abstract Trade relations are governed by a multilateral agreement, whereas the avoidance of double taxation rests on a network of about 2000 separate bilateral treaties. What accounts for the diﬀerence in the institu- tional form? Distinguishing between the bargaining and agreement stage of international cooperation, we ﬁrst show that the institutional design of both regimes is more complex than commonly assumed. Both exhibit a mix of bilateral and multilateral bargaining that precedes multilateral agreement in trade and bilateral agreement in taxation. We demonstrate that in both regimes, governmental concerns for the distribution of beneﬁts can best be achieved through bilateral bargaining. Multilateral bargaining serves to reduce the high transaction costs of bilateral bargains. Multilateral agreement in trade helps to over- come the problem of free-riding that results from a particular interaction of concerns on distribution and enforcement
International Negotiation – Brill
Published: Jan 1, 2007
Keywords: ENFORCEMENT; RATIONAL DESIGN; BARGAINING; DISTRIBUTION; INTERNATIONAL TAXATION; INTERNATIONAL TRADE
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