AEI's Phil Levy has written a very thoughtful and provocative new study on Peru's motivations behind entering into the US-Peru Trade Promotion Agreement (PTPA). In it, Levy examines the evidence and interviews Peruvian business people and government officials to determine why they worked so hard to secure passage - at home and in the United States - and implementation of the PTPA when Peru was already enjoying duty-free access for more than 90% of its US-bound exports. His findings will surprise most people:
Bilateral free trade agreements have generally been analyzed as instances of preferential reciprocal tariff liberalization. Viewed through this lens, such agreements raise concerns both about new competition and about trade diversion. The United States-Peru Trade Promotion Agreement, an example of a serious North-South accord, demonstrates that new market access was not a principal Peruvian goal in the trade negotiations. Instead, the agreement was intended to encourage investment by locking in Peru's economic reforms. This motivation has very different implications for the global trading system than a quest for preferential access.
Great food for thought.