The Zollverein, the outcome of sequential negotiations between Prussia and other sovereign German states in 1834, was the first international customs union, the template for modern ones such as the European Union. This paper applies a bargaining model to analyse the logic behind the creation of this novel institutional form and the choice of sequential rather than multilateral negotiations. The existence of negative coalition externalities, the effects of new coalitions on non-participants, led the agenda setter, Prussia, to choose sequential over multilateral negotiations as that lowered the membership reservation prices of the other states involved. Institutionally, the features of a customs union structure provided a higher payoff for the agenda setter than capturing the welfare gains from the differential tariff setting in a free trade agreement, explaining the emergence of this novel institutional structure on an international scale.

What type of trade agreement is the public willing to accept? Instead of focusing on individual concerns about market access and trade barriers, we argue that specific treaty design and, in particular, the characteristics of the dispute settlement mechanism, play a critical role in shaping public support for trade agreements. To examine this theoretical expectation, we conduct a conjoint experiment that varies diverse treaty-design elements and estimate preferences over multiple dimensions of the Transatlantic Trade and Investment Partnership (TTIP) based on a nationally representative sample in Germany. We find that compared to other alternatives, private arbitration, known as investor-state dispute settlement (ISDS), generates strong opposition to the trade agreement. As the single most important factor, this effect of dispute settlement characteristic is strikingly large and consistent across individuals’ key attributes, including skill levels, information, and national sentiment, among others.

After Mexican sugar producers gained unlimited, tariff-free access to the U.S. market in 2008, U.S. and Mexican governments bilaterally agreed to constrain Mexico’s sugar exports to the United States because of dumping allegations by U.S. producers in December 2014. This analysis employs a dynamic partial equilibrium model to estimate the price and welfare impacts of the U.S.-Mexico agreement by simulating the reimplementation of North American Free Trade Agreement sugar policies. Estimates suggest liberalizing the market would decrease U.S. sugar prices, translating to an average annual decrease in producer surplus of approximately $660 million and increase in consumer surplus of $1.67 billion across the simulation.