Do bilateral investment treaties attract foreign direct investment? Only a bit - and they could bite

By Mary C. Hallward-Driemeier. 2003

216 citations recorded by the source corpus.

Touted as an important commitment device that attracts foreign investors, the number of bilateral investment treaties (BITs) ratified by developing countries has grown dramatically. The author tests empirically whether BITs have actually had an important role in increasing the foreign direct investment (FDI) flows to signatory countries. While half of OECD FDI into developing countries by 2000 was covered by a BIT, this increase is accounted for by additional country pairs entering into agreements rather than signatory hosts gaining significant additional FDI. The results also indicate that such treaties act more as complements than as substitutes for good institutional quality and local property rights, the rationale often cited by developing countries for ratifying BITs. The relevance of these findings is heightened not only by the proliferation of such treaties, but by recent high profile legal cases. These cases show that the rights given to foreign investors may not only exceed those enjoyed by domestic investors, but expose policymakers to potentially large-scale liabilities and curtail the feasibility of different reform options. Formalizing relationships and protecting against dynamic inconsistency problems are still important, but the results should caution policymakers to look closely at the terms of agreements.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/d00acebd5eaa9a94f9afcb7b2102e430e9b96c11

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Todd L. Allee
2. Clint Peinhardt
3. Yoram Z. Haftel
4. Kenneth C. Shadlen

In Strategy and Management

1. Yoram Z. Haftel
2. Todd L. Allee
3. Clint Peinhardt
4. Kenneth C. Shadlen
5. Sonal S. Pandya

Citations in the corpus

• Evaluating Three Explanations for the Design of Bilateral Investment Treaties (2014, unknown): “…is whether studies examine the effects of us bIts only (salacuse and sullivan 2005), a broader cross-national sample (Egger and pfaffermayer 2004; hallward-driemeier 2003; neumayer and spess 2005), or perhaps both (tobin and rose-ackerman 2011). furthermore, some studies focus on signed bIts,…”
• Exchanging development for market access? Deep integration and industrial policy under multilateral and regional-bilateral trade agreements (2005, background): “30 Note that investment agreements alone, without complementary trade provisions, may not have the same effects in terms of stimulating foreign investment (Hallward-Driemeier, 2003).”
• Foreign Direct Investment and Bilateral Investment Treaties an International Political Perspective (2009, unknown): “Hallward-Driemeier (2003) and Neumayer and Spess (2005) are two exceptions, and they reach opposite conclusions.”
• Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment (2011, background): “…2008; and Muchlinski 2009+ 8+ Allee and Peinhardt 2010+ 9+ See Bubb and Rose-Ackerman 2007; Büthe and Milner 2009; Egger and Pfaffermayr 2004; Haftel 2010; Hallward-Driemeier 2003; Kerner 2009; and Salacuse and Sullivan 2005+ For a contrasting view, see Yackee 2009+ in-depth, credibility-based…”
• FDI promotion through bilateral investment treaties: more than a bit? (2010, unknown): “Our sample consists of 83 developing host countries, which is almost three times as large as the sample used by Hallward-Driemeier (2003).”
• Ratification counts: US investment treaties and FDI flows into developing countries (2010, background): “These expenses can be quite substantial for developing countries, especially if faced with multiple claims (Hallward-Driemeier, 2003: 22; Salacuse and Sullivan, 2005: 87–90).”