World Politics

Research Article

Bilateral Treaties and The Most-Favored-Nation Clause: The Myth of Trade Liberalization in the Nineteenth Century

Olivier Accominottia1 and Marc Flandreaua1a2*

a1 Paris, olivier.accominotti@sciences-po.org

a2 Paris, marc.flandreau@graduateinstitute.ch

Textbook accounts of the Anglo-French trade agreement of 1860 argue that it heralded the beginning of a liberal trading order. This alleged success holds much interest from a modern policy point of view, for it rested on bilateral negotiations and most-favored-nation clauses. With the help of new data on international trade (the RICardo database), the authors provide empirical evidence and find that the treaty and subsequent network of MFN trade agreements coincided with the end of a period of unilateral liberalization across the world. They also find that it did not contribute to expanding trade at all. This is contrary to a deeply rooted belief among economists, economic historians, and political scientists. The authors draw a number of policy lessons that run counter to the conventional wisdom and raise skepticism toward the ability of bilateralism and MFN arrangements to promote trade liberalization.

Olivier Accominotti is a doctoral candidate at Sciences Po, Paris. His dissertation focuses on international financial instability, trade, and contagion in the interwar years. He can be reached at olivier.accominotti@sciences-po.org.

Marc Flandreau is a professor of economics at Sciences Po, Paris. He has recently been appointed professor of economics and history at the Graduate Institute in Geneva and will join the faculty there in September 2008. He is a specialist in international macroeconomic history. He is the author of Money Doctors: The Experience of International Financial Advising, 1850-2000 (2004). He can be reached at marc.flandreau@graduateinstitute.ch.

* For their research help in collecting the database, we thank colleagues and students and in particular Béatrice Dedinger, Jérôme Destombes, Clemens Jobst, and Guillaume Daudin. For comments on an earlier draft, we are grateful to Jagdish Bhagwati, Barry Eichengreen, Andy Rose, Mike Tomz, and Jeffrey Williamson, as well as to seminar participants at Columbia, Harvard, Carlos III, Pompeu Fabra, and the Bank of France. Detailed suggestions from referees of World Politics were very helpful in revising the draft. Financial support from the Bank of France research grant on “Trade, finance, and globalization” and from the Agence Nationale de la Recherche grant for the RICardo project are gratefully acknowledged.