Articlegreen2013

Foreign Direct Investment and Institutional Diversity in Trade Agreements: Credibility, Commitment, and Economic Flows in the Developing World, 1971–2007

194 citations0/0 files storedWorld Politics

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International Business and FDI Global trade and economics International Arbitration and Investment Law

Abstract

International trade agreements can help developing countries attract foreign direct investment. We ask whether differences in the specific provisions included in trade agreements have differential effects on FDI. Can trade agreements with more credible commitments to protect investment induce more FDI than other agreements? We explore four institutional differences among preferential trade agreements (PTAs). We first examine whether those that have entered into force lead to greater FDI than PTAs that have merely been negotiated and signed. Second, do trade agreements that have investment clauses lead to greater FDI? Third, we examine the impact of dispute settlement mechanisms in PTAs. Turning to multilateral agreements, we differentiate the GATT from the WTO, since the latter allows member states to commit more credibly to more comprehensive obligations. Analyses of FDI flows into 125 developing countries from 1971 to 2007 show that more FDI is induced by trade agreements that include stronger mechanisms for credible commitment. Institutional diversity in international agreements matters.

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References

2000Hard and Soft Law in International Governance 2001The Rational Design of International Institutions 2000The Institutional Environment for Economic Growth 2006Delegation and Agency in International Organizations 2008Taking Time Seriously 2015Cross-National Time-Series Data Archive 2008The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements?1989International Institutions And State Power: Essays In International Relations Theory

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