The Institutional Choice of Bilateralism and Multilateralism in International Trade and Taxation

The Institutional Choice of Bilateralism and Multilateralism in International Trade and Taxation © 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: t.rixen@jacobs-university.de; 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 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Negotiation Brill

The Institutional Choice of Bilateralism and Multilateralism in International Trade and Taxation

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Publisher
Brill
Copyright
© 2007 Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1382-340X
eISSN
1571-8069
D.O.I.
10.1163/138234007X240718
Publisher site
See Article on Publisher Site

Abstract

© 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: t.rixen@jacobs-university.de; 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

Journal

International NegotiationBrill

Published: Jan 1, 2007

Keywords: ENFORCEMENT; RATIONAL DESIGN; BARGAINING; DISTRIBUTION; INTERNATIONAL TAXATION; INTERNATIONAL TRADE

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