Comparative Advantage and the Design of International Agreements: A Law and Economics Perspective on Treaties as Contracts

This paper explores how the institutional form of international treaties affects
their attitude to realize the efficiency gains predicted by Ricardo’s model of com
parative advantage. We argue that contractual treaties—those based on reciprocal
obligations, preference revelation, and credible enforcement—are more consistent
with Ricardian logic than normative treaties, which rely on general and abstract
principles and weak compliance mechanisms. By constructing a formal comparison
between the two treaty forms, we demonstrate that just contractual treaties permit
full realization of comparative advantage when parties possess private information
and asymmetric preferences. The findings have broad implications for international
trade, treaty design, and the future of multilateralism (and bilateralism).