When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning

Abstract

Subsequent to editorial input by Cambridge University Press, paper is forthcoming in:World Politics, vol. 65, no. 2 (April 2013)Abstract. Using the international investment regime as its point of departure, the paper applies notions of bounded rationality to the study of economic diplomacy. Through a multi-method approach, it shows that developing countries often ignored the risks of bilateral investment treaties (BITs) until they themselves became subject to an investment treaty claim. Thus the behavior of developing country governments with regard to the international investment regime is consistent with that consistently observed for individuals in experiments and field studies: they tend to ignore high-impact, low-probability risks if they cannot bring specific 'vivid' instances to mind.

The Behavioral Revolution and International Relations

“…72. Galbraith 2013;Victor 2016a, 2016b;Poulsen 2013. aren't. She argues that legal obligation is rooted in cosmopolitan social identity.…”

“…13. For behavioral research in the field of international law, see Broude 2015;Galbraith 2013;Jolls, Sunstein, and Thaler 1998;Poulsen 2013;Sitaraman and Zionts 2015;van Aaken 2014. 14. For example, see research on leaders by Horowitz, McDermott, and Stam 2005 and on time horizons by Edelstein 2002 andKrebs andRapport 2012. 15.…”

The non-ratification of bilateral investment treaties in Brazil: a story of conflict in a land of cooperation†

“…The Brazilian case is perplexing for many reasons. First, it diverges from the behavior of most other emerging economies in the 1990s, which frequently ratified the treaties signed without much political debate (Poulsen and Aisbett, 2013). Second, it differs from Brazilian experience with respect to comparable legislation; in the same period that BITs were being negotiated, the legislature approved various investor-friendly policies that required even higher voting thresholds.…”

“…It also sheds light on the domestic politics of the global investment regime (Commission, 2010;Haslam, 2010;Salacuse, 2010;Van Harten, 2005), and on the study of policy diffusion Weyland, 2007), as it reveals how the provision of information by a highly technical congressional bureaucracy managed to hinder diffusion by imitation and to promote learning based on other countries' experiences (Poulsen and Aisbett, 2013).…”

Global Value Chains and Deep Preferential Trade Agreements: Promoting Trade at the Cost of Domestic Policy Autonomy?

“…For example, Poulsen / Aisbett (2013) found that many decision-makers in developing countries had not been aware of the farreaching contents of international investment agreements (IIAs) until they were sued before the investor-state dispute settlement body.…”