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Anne van Aaken and Tomer Broude

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Tomer Broude and Shai Moses

From a standard rational choice perspective, the choice architecture of an international trade in services liberalization scheme as structured around either positive or negative listing should not have any appreciable effect on the depth and breadth of commitments. In contrast, behavioral economics, in particular Prospect Theory and phenomena such as framing effects and status quo bias, suggest that a negative list approach would be more conducive to economic liberalization. Several additional complicating factors, such as sectoral considerations, negotiating asymmetries and transaction costs, preclude this hypothesis from being subjected to reliable empirical testing. However, a case study of the currently ongoing negotiations towards a plurilateral Trade in Services Agreement (TiSA), reveals that trade diplomats are acutely attuned to the potential importance of such negotiated ‘choice architecture’, and that behavioral effects can exert significant influence on negotiations. This demonstrates that behavioral dynamics, especially compromise effects, are a significant part of international trade talks, at least with respect to services trade.