Do Trade and Investment Agreements Lead to More FDI? Accounting for Key Provisions Inside the Black Box

Berger, Axel; Busse, Matthias; Nunnenkamp, Peter; Roy, Martin

doi:10.2139/ssrn.1838660

Cited by 55 publications

(63 citation statements)

References 36 publications

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“…Similarly, bilateral investment treaties have positive effects on FDI inflows to developing economies in general (Desbordes and Vicard, 2009) and to MENA economies in particular (Mina, 2012). In addition, RTAs offering more liberal rules for admission and provisions for foreign investment logically have a higher positive impact on FDI (Berger et al, 2013). Lower tariffs and regulatory obstacles between two countries may be favorable to vertical FDI because the cost of importing components and re-exporting is minimal and, on the contrary, detrimental to horizontal FDI by enabling trade substitution for FDI (Caves, 1996;Markusen, 1984Markusen, , 2002.…”

Section: Fdi Uncertainty and Trade Integration: Hypotheses And Exismentioning

confidence: 99%

The Effect of Macroeconomic Instability on FDI Flows: A Gravity Estimation of the Impact of Regional Integration in the Case of Euro-Mediterranean Agreements

Chenaf-Nicet

Rougier

2015

SSRN Journal

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www.gretha.fr Cahiers du GREThA 2016 -01 IDE, intégration régionale et instabilité macroéconomique: Une analyse gravitaire des pays MENA dans le cadre des accords Euro-Méditerranéens Résumé Afin de diversifier leurs risques, les entreprises confrontées à l'incertitude sur leur marché intérieur peuvent choisir d'augmenter leurs investissements à l'étranger en transférant la production vers des économies plus stables. En estimant un modèle de gravité de l'investissement direct à l'étranger (IDE) en provenance d'Europe et de la région méditerranéenne et à destination des quatre principaux bénéficiaires dans la région Afrique du Nord-Moyen-Orient (MENA) sur la période 1985-2009, cet article teste la mesure dans laquelle les entrées d'IDE sont affectées par la volatilité macroéconomique dans le pays d'origine et si les accords régionaux de commerce et d'investissement pourraient avoir augmenté la sensibilité des IDE à la volatilité macroéconomique dans le pays d'origine. Nous constatons que l'incidence de l'IDE entre deux pays augmente avec l'instabilité du PIB dans le pays source et avec la stabilité du PIB dans le pays hôte. En outre, les IDE vers les pays de la région MENA tendent à être contra-cyclique par rapport au cycle d'affaires du pays source. Nous constatons également que bien que la réactivité des IDE à l'incertitude macroéconomique des pays source ne soit pas conditionnée par des accords commerciaux et d'investissement Nord-Sud, cette réactivité devient négative pour l'intégration régionale Sud-Sud. Enfin, nous montrons que, bien que l'instabilité du pays d'origine compte certainement pour expliquer les flux bilatéraux d'IDE dans notre échantillon, son impact est plus limité lorsque les investissements sont dictés par les différentiels de coûts, ce qui est le cas pour les IDE vertical. Mots-clés : Volatilité du PIB, IDE, modèle gravitaire, Union Européenne, Afrique du nord et moyen orient, intégration régionale, traités d'investissement bilatéraux, IDE horizontal, IDE vertical The effect of macroeconomic instability on FDI flows: A gravity estimation of the impact of regional integration in the case of Euro-Mediterranean agreements AbstractIn order to diversify their risks, firms facing uncertainty in their domestic market may choose to increase their investment abroad by transferring production to more stable host economies. By estimating a gravity model of foreign direct investment (FDI) flows from Europe and the Mediterranean region to the four main recipients of FDI in the Middle East and North Africa (MENA) region from 1985 to 2009, this article tests (1) the extent to which FDI inflows are affected by macroeconomic volatility in the source country and (2) whether regional trade and investment agreements could have increased this FDI sensitivity to source country's macroeconomic volatility. We find that the incidence of FDI between two countries increases with source GDP instability and with host GDP stability. Moreover, FDI to MENA countries tends to be countercyclical with respect to the source cou...

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Section: Fdi Uncertainty and Trade Integration: Hypotheses And Exismentioning

confidence: 99%

The Effect of Macroeconomic Instability on FDI Flows: A Gravity Estimation of the Impact of Regional Integration in the Case of Euro-Mediterranean Agreements

Chenaf-Nicet

Rougier

2015

SSRN Journal

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“… Recent research has delved deeper into the provisions of BITs. Berger, Busse, Nunnenkamp, and Roy () consider the guarantees of market access provided by means of national treatment and most‐favoured‐nation treatment in the pre‐establishment phase; and credible commitments against discriminatory and discretionary treatment provided by international dispute settlement mechanisms in the postestablishment phase. They conclude that liberal admission rules promote bilateral FDI, but that dispute settlement provisions play only a minor role.…”

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confidence: 99%

North‐South foreign direct investment and bilateral investment treaties

Falvey

Foster‐McGregor

2017

World Economy

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Bilateral investment treaties (BITs) have become increasingly popular as a means of encouraging foreign direct investment (FDI) from developed to developing countries. We adopt a difference‐in‐difference analysis to deal with the problem of self‐selection when estimating the effects of BITs on FDI flows from a sample of OECD countries to a broader sample of lesser developed countries. Our results indicate that forming a BIT with a developed country significantly increases FDI inflows to developing countries. We further find that the development of new FDI flows and the reinvigoration of deteriorating FDI relationships accounts for the majority of the increase in FDI flows due to BIT formation.

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“…224 According to Berger and others, the impact of investment protection on FDI is very much contingent upon the content of the respective agreement. 225 They concluded that national treatment provisions are more significant than ISDS.…”

Section: Increase Of Fdi and Depoliticization Of Investment Disputesmentioning

confidence: 99%

Does Investor-State Dispute Settlement Discriminate Against Nationals?

Riffel¹

2020

German Law Journal

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This Article answers the question of whether investor-state dispute settlement ("ISDS") discriminates against nationals by providing foreign investors with an extra avenue to challenge state measures. The complaint that ISDS is discriminatory as a matter of principle has surfaced before several European constitutional courts-including the German Federal Constitutional Court and the European Court of Justice-in connection with the ratification of the Comprehensive Economic and Trade Agreement between Canada and the European Union ("CETA"). This Article rejects this complaint. The Federal Constitutional Court was able to leave the question of discrimination open in the applications for a preliminary injunction to stop ratification. It will have to take a stand, however, in the principal proceedings. If the Court were to side with the applicants, it would sound the death knell not only for the CETA in its present form, but also for the multilateral investment court system promoted by the European Union and, in particular, Germany. The point made by the applicants in the CETA complaint is not only of importance in a European constitutional law context. Whether ISDS is per se discriminatory is a fundamental issue which requires answering before any reform steps in relation to ISDS are addressed.

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Do Trade and Investment Agreements Lead to More FDI? Accounting for Key Provisions Inside the Black Box

Cited by 55 publications

References 36 publications

The Effect of Macroeconomic Instability on FDI Flows: A Gravity Estimation of the Impact of Regional Integration in the Case of Euro-Mediterranean Agreements

The Effect of Macroeconomic Instability on FDI Flows: A Gravity Estimation of the Impact of Regional Integration in the Case of Euro-Mediterranean Agreements

North‐South foreign direct investment and bilateral investment treaties

Does Investor-State Dispute Settlement Discriminate Against Nationals?

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