Exit from Trade Agreements: A Reputational Analysis of Cooperation and Fairness

The last three years have been marked more by exits from trade agreements than by the successful completion of major additional pacts. While most of the international trade literature focuses on the best methods of better integrating national markets, this article seeks to examine the effect of exit on international relations. We generally assume that the costs of severing economic ties is enough to maintain trade agreements, but that proposition no longer seems robust in our current moment of widespread dissatisfaction with trade relations. This article, therefore, seeks to look outside of trade-related costs of exit to possible extralegal costs, particularly reputational or community costs, of exit. The article also aims to provide the first cut of distinguishing between the two types of reputations—one for being ‘uncooperative’ and one for being ‘unfair’. Drawing on behavioral theories, the article begins to develop a distinction between an audience’s belief that a state is acting ‘uncooperatively’ as compared to ‘unfairly’ and what the consequences of this distinction may be. The article illustrates how different types of exit can have divergent reputational effects.