International Economics and Economic Policy · International Economics and Economic Policy
Do trade and investment agreements lead to more FDI? Accounting for key provisions inside the black box
The previous literature provides a highly ambiguous picture on the impact of trade and investment agreements on FDI. Most empirical studies ignore the actual content of BITs and RTAs, treating them as “black boxes”, despite the diversity of investment provisions constituting the essence of these agreements. We overcome this serious limitation by analyzing the impact of modalities on the admission of FDI and dispute settlement mechanisms in both RTAs and BITs on bilateral FDI flows between 1978 and 2004. We find that FDI reacts positively to RTAs only if they offer liberal admission rules. Dispute settlement provisions play a minor role. While RTAs without strong investment provisions may even discourage FDI, the reactions to BITs are less discriminate with foreign investors responding favorably to the mere existence of BITs.
Full publication is available on: DOI 10.1007/s10368-012-0207-6
Contributors from our Network
German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)
Dr. Axel Berger is a Senior Researcher at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE), Programme Transformation of Economic and Social Systems. He is heading the G20 Policy Research Group at DIE and led the T20 Task Force on Trade, Investment and Tax in 2017, 2018 and 2019. Axel holds a doctorate in political science from the University of Duisburg-Essen and a Master’s degree from the Munich Ludwig-Maximilians-University in political science, economics and modern history. He works on the design, effects and diffusion patterns of international trade and investment agreements, with a focus on emerging markets and developing countries. Other areas of current research include the effects of an international investment facilitation framework, the impact of free trade agreements on upgrading within global value chains and the role of the G20 in global governance. He teaches international political economy at the University of Bonn and regularly advises developing countries, development agencies and international organisations on trade and investment matters.Read more about Axel Berger ›