Cheap Talk or True Impact? Democracy Promotion in Trade Agreements in Chile and Peru

Despite existing literature on democratic powers’ democracy promotion agenda as part of their foreign policy objectives, including through trade policy, little is known about the potential mechanisms through which this agenda is actually implemented. Yet, a better understanding of how trade policy might promote democracy is of great importance, given the rise of autocratic trade powers and democratic backsliding. This paper investigates to what extent democratic powers can successfully diffuse democratic norms through the implementation of democracy-related provisions signed in preferential trade agreements (PTAs). I argue that such provisions are more likely to be implemented when signed for the first time with a democratizing country. The ratification of an unprecedented comprehensive PTA with a large democratic power generates audience costs, facilitating the implementation of democracy-related provisions. To empirically test my argument, I rely on novel data on case studies of Chile and Peru – two countries that have signed the most agreements including democracy-related provisions with democratic powers and simultaneously underwent a significant democratisation transition. I analyse democracy-related provisions in PTAs and map these against parliamentary debates of the ratification of PTAs and interview data with over 30 government officials and civil society representatives. I find that the highest level of implementation of democracy-related provisions are associated with the implementation of Chile’s and Peru’s first comprehensive agreements, signed with respectively Canada and the US, two major democratic powers. I also demonstrate that effects are heterogenous across types of democracy-related provisions, countries’ political will to lock-in reform and democratic powers’ implementation strategies.