American Political Science Review (2018)112.4,1016-1035 doi:10.1017/S0003055418000400 American Political Science Association 2018 Reelection and Renegotiation:International Agreements in the Shadow of the Polls PETER BUISSERET University of Chicago DAN BERNHARDT University of Illinois and University of Warwick e study dynamic international agreements when one of the negotiating parties faces a threat of electoral replacement during negotiations,when agreements made before the election are the starting point for any subsequent renegotiation,and when governments cannot commit to future negotiation strategies.Conflicts of interest between governments may be softened or intensified by the governments'conflicts of interest with voters.We characterize when the threat of electoral turnover strengthens the prospect for successful negotiations,when it may cause negotiations to fail,and how it affects the division of the surplus from cooperation.We also show how changes in domestic politics- including uncertainty about the preferences of domestic political parties-affect a domestic government's ability to extract greater concessions in negotiations. "I decided rather than terminating NAFTA...we will renego- 1974 election manifesto promised to "seek a funda- tiate.Now,if I'm unable to make a fair deal,if I'm unable to mental re-negotiation."Upon entering government make a fair deal for the United States,meaning a fair deal for in 1974,Labour reopened negotiations,obtaining con- our workers and our companies,I will terminate NAFTA cessions in exchange for the UK's continued partici- But we're going to give renegotiation a good,strong shot." pation.After the 2015 general election,a Conserva- President Trump,April 27,2017 tive government initiated the renegotiation that culmi- nated in a vote for the UK to exit the European Union ("Brexit").In May 2017,the Trump administration no- INTRODUCTION tified Congress that it plans to renegotiate the North tates sign treaties,accede to international institu- American Free Trade Agreement(NAFTA).And in tions and organizations,and lend money to other June 2017,Donald Trump withdrew the United States states.The division of the surplus arising from from the Paris Climate accord with the prime intent to these activities is negotiated by the governments of the renegotiate better terms,asserting: day.However,these governments may,in turn,be re- placed by new governments over the life of the agree- "In order to fulfill my solemn duty to protect America and ment.This raises the possibility that arrangements its citizens,the United States will withdraw from the Paris signed by today's administrations may not be honored climate accord but begin negotiations to reenter either the by their successors. Paris accord or an entirely new transaction on terms that are fair to the United States." In fact,newly elected governments often try to rene- gotiate a predecessor's agreement.A Conservative government took the United Kingdom into the Eu- International negotiations may polarize and even ropean Economic Community (EEC)in 1973.That dominate domestic politics.In March 2010,the Euro- same year,the Labour Party declared that it "opposes pean Central Bank,EU,and IMF (the "Troika")es- British membership [in the EEC]on the terms ne- tablished emergency loan agreements to Greece.The gotiated by the Conservative Government,"and its first Greek bailout was negotiated between the Troika and the center-left PASOK government,which held a parliamentary majority of fewer than ten seats and Peter Buisseret is an Assistant Professor,Harris School of Public Pol- hence faced an ongoing threat of electoral replace- icy,University of Chicago(pbuisseret@uchicago.edu). ment over the life of the agreement.A domestic power Dan Bernhardt is IBE Distinguished Professor,Department of transition to an anti-bailout party could threaten the Economics,University of Illinois,and a Professor,Department of agreement's survival and the perceived harshness of Economics,University of Warwick(danber@illinois.edu) the initial terms could itself increase the chance of a We are indebted to Vincent Anesi,Mark Fey,and Amy Pond for their discussions of earlier drafts of this paper.In particular,we grate- more hostile future government via voters'dissatisfac- fully acknowledge Mark Fey's help in clarifying our intuition be- tion with the agreement.Both risks were realized:in hind Lemma 1.We also thank Emiel Awad,Steve Callander,Ker the next election.PASOK lost 119 seats.while Syriza- win Charles,John Duggan,Wiola Dziuda,Jon Eguia,Gilat Levy. the radical left-wing party that staunchly opposed the Kostas Matakos,Adam Meirowitz,Pablo Montagnes,Stephanie Rickard,Alastair Smith,and Richard Van Weelden for very help- bailout terms-became the second largest party.In Jan- ful discussions.We are grateful to seminar audiences at King's, uary 2015,Syriza came to power on the back of the Bath,Columbia.the Cornell Political Economy Conference.the Greek electorate's hostility to the austerity measures. Canadian Public Economic Group Meeting,and the UNSW-UQ Po- The new Greek government immediately reopened litical Economy Workshop.The Editor and three anonymous refer- ees offered many excellent suggestions that substantially improved this paper. 士 The first quote is from Labour's Programme for Britain (1973),and Received:August 10,2017:revised:March 2.2018:accepted:June 14. the second is from the Labour Party's February 1974 general election 2018.First published online:September 10,2018. manifesto. 1016American Political Science Review (2018) 112, 4, 1016–1035 doi:10.1017/S0003055418000400 © American Political Science Association 2018 Reelection and Renegotiation: International Agreements in the Shadow of the Polls PETER BUISSERET University of Chicago DAN BERNHARDT University of Illinois and University of Warwick We study dynamic international agreements when one of the negotiating parties faces a threat of electoral replacement during negotiations, when agreements made before the election are the starting point for any subsequent renegotiation, and when governments cannot commit to future negotiation strategies. Conflicts of interest between governments may be softened or intensified by the governments’ conflicts of interest with voters. We characterize when the threat of electoral turnover strengthens the prospect for successful negotiations, when it may cause negotiations to fail, and how it affects the division of the surplus from cooperation. We also show how changes in domestic politics— including uncertainty about the preferences of domestic political parties—affect a domestic government’s ability to extract greater concessions in negotiations. “I decided rather than terminating NAFTA...we will renego￾tiate. Now, if I’m unable to make a fair deal, if I’m unable to make a fair deal for the United States,meaning a fair deal for our workers and our companies, I will terminate NAFTA. But we’re going to give renegotiation a good, strong shot.” President Trump, April 27, 2017 INTRODUCTION States sign treaties, accede to international institu￾tions and organizations, and lend money to other states. The division of the surplus arising from these activities is negotiated by the governments of the day. However, these governments may, in turn, be re￾placed by new governments over the life of the agree￾ment. This raises the possibility that arrangements signed by today’s administrations may not be honored by their successors. In fact, newly elected governments often try to rene￾gotiate a predecessor’s agreement. A Conservative government took the United Kingdom into the Eu￾ropean Economic Community (EEC) in 1973. That same year, the Labour Party declared that it “opposes British membership [in the EEC] on the terms ne￾gotiated by the Conservative Government,” and its Peter Buisseret is an Assistant Professor,Harris School of Public Pol￾icy, University of Chicago (pbuisseret@uchicago.edu). Dan Bernhardt is IBE Distinguished Professor, Department of Economics, University of Illinois, and a Professor, Department of Economics, University of Warwick (danber@illinois.edu). We are indebted to Vincent Anesi, Mark Fey, and Amy Pond for their discussions of earlier drafts of this paper. In particular, we grate￾fully acknowledge Mark Fey’s help in clarifying our intuition be￾hind Lemma 1. We also thank Emiel Awad, Steve Callander, Ker￾win Charles, John Duggan, Wiola Dziuda, Jon Eguia, Gilat Levy, Kostas Matakos, Adam Meirowitz, Pablo Montagnes, Stephanie Rickard, Alastair Smith, and Richard Van Weelden for very help￾ful discussions. We are grateful to seminar audiences at King’s, Bath, Columbia, the Cornell Political Economy Conference, the Canadian Public Economic Group Meeting, and the UNSW-UQ Po￾litical Economy Workshop. The Editor and three anonymous refer￾ees offered many excellent suggestions that substantially improved this paper. Received: August 10, 2017; revised: March 2, 2018; accepted: June 14, 2018. First published online: September 10, 2018. 1974 election manifesto promised to “seek a funda￾mental re-negotiation.”1 Upon entering government in 1974, Labour reopened negotiations, obtaining con￾cessions in exchange for the UK’s continued partici￾pation. After the 2015 general election, a Conserva￾tive government initiated the renegotiation that culmi￾nated in a vote for the UK to exit the European Union (“Brexit’’). In May 2017, the Trump administration no￾tified Congress that it plans to renegotiate the North American Free Trade Agreement (NAFTA). And in June 2017, Donald Trump withdrew the United States from the Paris Climate accord with the prime intent to renegotiate better terms, asserting: “In order to fulfill my solemn duty to protect America and its citizens, the United States will withdraw from the Paris climate accord but begin negotiations to reenter either the Paris accord or an entirely new transaction on terms that are fair to the United States.” International negotiations may polarize and even dominate domestic politics. In March 2010, the Euro￾pean Central Bank, EU, and IMF (the “Troika’’) es￾tablished emergency loan agreements to Greece. The first Greek bailout was negotiated between the Troika and the center-left PASOK government, which held a parliamentary majority of fewer than ten seats and hence faced an ongoing threat of electoral replace￾ment over the life of the agreement. A domestic power transition to an anti-bailout party could threaten the agreement’s survival and the perceived harshness of the initial terms could itself increase the chance of a more hostile future government via voters’ dissatisfac￾tion with the agreement. Both risks were realized: in the next election, PASOK lost 119 seats, while Syriza— the radical left-wing party that staunchly opposed the bailout terms—became the second largest party. In Jan￾uary 2015, Syriza came to power on the back of the Greek electorate’s hostility to the austerity measures. The new Greek government immediately reopened 1 The first quote is from Labour’s Programme for Britain (1973), and the second is from the Labour Party’s February 1974 general election manifesto. 1016 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:04, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000400