IDEAS home Printed from https://ideas.repec.org/a/bla/ecopol/v33y2021i3p415-442.html
   My bibliography  Save this article

Investment commitments in PTAs and MNCS in partner countries

Author

Listed:
  • Soo Yeon Kim

Abstract

This paper analyzes the impact of investment commitments in preferential trade agreements (PTAs) on multinational firms' production networks. The analysis tests the hypothesis that strong investment commitments in PTAs encourage multinational firms to locate affiliates in agreement partners. Agreement countries are desirable locations for MNCS' production networks because PTAs reduce the costs of information concerning the host countries, provide a common regulatory framework for investment by way of the PTA, and embed investment in a larger package of trade liberalization that facilitates cross‐border movement of intermediate goods. The study employs an original dataset of investment provisions in PTAs that measures the liberalization, protection, and integration in investment activities, and another on the location of multinational firms' subsidiaries. An analysis of 317 PTAs supports the main hypothesis: strong investment commitments in PTAs are associated with a higher number of common MNC affiliates among partner countries, controlling for a host of political and economic factors. This paper contributes to the scholarship on multinational firms' behavior in the post‐agreement phase of PTAs and more broadly on the mapping of trade agreement provisions in key areas of global production.

Suggested Citation

  • Soo Yeon Kim, 2021. "Investment commitments in PTAs and MNCS in partner countries," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 415-442, November.
    • Handle: RePEc:bla:ecopol:v:33:y:2021:i:3:p:415-442
    DOI: 10.1111/ecpo.12183
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecpo.12183
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ecpo.12183?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," CEPR Discussion Papers 1659, C.E.P.R. Discussion Papers.
    2. Philippa Dee & Jyothi Gali, 2005. "The Trade and Investment Effects of Preferential Trading Arrangements," NBER Chapters, in: International Trade in East Asia, pages 133-176, National Bureau of Economic Research, Inc.
    3. Marc J. Melitz & Daniel Trefler, 2012. "Gains from Trade When Firms Matter," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 91-118, Spring.
    4. Baccini, Leonardo, 2010. "Explaining formation and design of EU trade agreements: the role of transparency and flexibility," LSE Research Online Documents on Economics 45565, London School of Economics and Political Science, LSE Library.
    5. Jensen, J. Bradford & Quinn, Dennis P. & Weymouth, Stephen, 2015. "The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes," International Organization, Cambridge University Press, vol. 69(4), pages 913-947, October.
    6. Neumayer, Eric & Spess, Laura, 2005. "Do bilateral investment treaties increase foreign direct investment to developing countries?," World Development, Elsevier, vol. 33(10), pages 1567-1585, October.
    7. Greenaway, David & Sapir, Andre, 1992. "New issues in the Uruguay round : Services, TRIMs and TRIPs," European Economic Review, Elsevier, vol. 36(2-3), pages 509-518, April.
    8. Smith, James McCall, 2000. "The Politics of Dispute Settlement Design: Explaining Legalism in Regional Trade Pacts," International Organization, Cambridge University Press, vol. 54(1), pages 137-180, January.
    9. Wolfgang Alschner & Dmitriy Skougarevskiy, 2016. "Mapping the Universe of International Investment Agreements," Journal of International Economic Law, Oxford University Press, vol. 19(3), pages 561-588.
    10. Jean-Pierre Chauffour & Jean-Christophe Maur, 2011. "Preferential Trade Agreement Policies for Development : A Handbook," World Bank Publications - Books, The World Bank Group, number 2329, December.
    11. Hofmann,Claudia & Osnago,Alberto & Ruta,Michele, 2017. "Horizontal depth : a new database on the content of preferential trade agreements," Policy Research Working Paper Series 7981, The World Bank.
    12. Andreas Dür & Leonardo Baccini & Manfred Elsig, 2014. "The design of international trade agreements: Introducing a new dataset," The Review of International Organizations, Springer, vol. 9(3), pages 353-375, September.
    13. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    14. Eduardo Levy Yeyati & Christian Daude & Ernesto Stein, 2002. "The FTAA and the Location of FDI," Business School Working Papers diecisiete, Universidad Torcuato Di Tella.
    15. repec:oup:jieclw:v:20:y:2017:i:2:p:391-417. is not listed on IDEAS
    16. World Trade Organisation WTO, 2011. "World Trade Report 2011- The WTO and Preferential Trade Agreements: From Co-existence to Coherence," Working Papers id:4335, eSocialSciences.
    17. Molly Lesher & Sébastien Miroudot, 2006. "Analysis of the Economic Impact of Investment Provisions in Regional Trade Agreements," OECD Trade Policy Papers 36, OECD Publishing.
    18. Lauge N. Skovgaard Poulsen & Emma Aisbett, 2011. "When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning," Crawford School Research Papers 1105, Crawford School of Public Policy, The Australian National University.
    19. repec:idb:brikps:6512 is not listed on IDEAS
    20. Quintin H. Beazer & Daniel J. Blake, 2018. "The Conditional Nature of Political Risk: How Home Institutions Influence the Location of Foreign Direct Investment," American Journal of Political Science, John Wiley & Sons, vol. 62(2), pages 470-485, April.
    21. Allee, Todd & Peinhardt, Clint, 2011. "Contingent Credibility: The Impact of Investment Treaty Violations on Foreign Direct Investment," International Organization, Cambridge University Press, vol. 65(3), pages 401-432, July.
    22. Johns, Leslie & Wellhausen, Rachel L., 2016. "Under One Roof: Supply Chains and the Protection of Foreign Investment," American Political Science Review, Cambridge University Press, vol. 110(1), pages 31-51, February.
    23. Busse, Matthias & Hefeker, Carsten, 2007. "Political risk, institutions and foreign direct investment," European Journal of Political Economy, Elsevier, vol. 23(2), pages 397-415, June.
    24. Dür, Andreas & Baccini, Leonardo & Elsig, Manfred, 2014. "The design of international trade agreements: introducing a new dataset," LSE Research Online Documents on Economics 59179, London School of Economics and Political Science, LSE Library.
    25. Julia Gray & Jonathan Slapin, 2012. "How effective are preferential trade agreements? Ask the experts," The Review of International Organizations, Springer, vol. 7(3), pages 309-333, September.
    26. repec:idb:brikps:80602 is not listed on IDEAS
    27. Axel Berger & Matthias Busse & Peter Nunnenkamp & Martin Roy, 2013. "Do trade and investment agreements lead to more FDI? Accounting for key provisions inside the black box," International Economics and Economic Policy, Springer, vol. 10(2), pages 247-275, June.
    28. Tim Büthe & Helen V. Milner, 2008. "The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements?," American Journal of Political Science, John Wiley & Sons, vol. 52(4), pages 741-762, October.
    29. Kucik, Jeffrey & Reinhardt, Eric, 2008. "Does Flexibility Promote Cooperation? An Application to the Global Trade Regime," International Organization, Cambridge University Press, vol. 62(3), pages 477-505, July.
    30. Thompson, Alexander & Broude, Tomer & Haftel, Yoram Z., 2019. "Once Bitten, Twice Shy? Investment Disputes, State Sovereignty, and Change in Treaty Design," International Organization, Cambridge University Press, vol. 73(4), pages 859-880, October.
    31. Manger,Mark S., 2009. "Investing in Protection," Cambridge Books, Cambridge University Press, number 9780521748704.
    32. Osgood, Iain, 2018. "Globalizing the Supply Chain: Firm and Industrial Support for US Trade Agreements," International Organization, Cambridge University Press, vol. 72(2), pages 455-484, April.
    33. Jeffrey Kucik, 2012. "The Domestic Politics of Institutional Design: Producer Preferences over Trade Agreement Rules," Economics and Politics, Wiley Blackwell, vol. 24(2), pages 95-118, July.
    34. Yoram Haftel, 2013. "Commerce and institutions: Trade, scope, and the design of regional economic organizations," The Review of International Organizations, Springer, vol. 8(3), pages 389-414, September.
    35. Steven Globerman & Daniel M Shapiro, 1999. "The Impact of Government Policies on Foreign Direct Investment: The Canadian Experience," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(3), pages 513-532, September.
    36. Manger,Mark S., 2009. "Investing in Protection," Cambridge Books, Cambridge University Press, number 9780521765046.
    37. Clint Peinhardt & Todd Allee, 2012. "Failure to Deliver: The Investment Effects of US Preferential Economic Agreements," The World Economy, Wiley Blackwell, vol. 35(6), pages 757-783, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lu Mao, 2023. "Study design for restricted mean time analysis of recurrent events and death," Biometrics, The International Biometric Society, vol. 79(4), pages 3701-3714, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ka Zeng & Yue Lu & Ya‐wei Li, 2021. "Trade agreements and Global Value Chain (GVC) participation: Evidence from Chinese industries," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 533-582, November.
    2. Jonas Gamso & Robert Grosse, 2021. "Trade agreement depth, foreign direct investment, and the moderating role of property rights," Journal of International Business Policy, Palgrave Macmillan, vol. 4(2), pages 308-325, June.
    3. Damian Raess & Andreas Dür & Dora Sari, 2018. "Protecting labor rights in preferential trade agreements: The role of trade unions, left governments, and skilled labor," The Review of International Organizations, Springer, vol. 13(2), pages 143-162, June.
    4. Seungjun Kim, 2023. "Protecting home: how firms’ investment plans affect the formation of bilateral investment treaties," The Review of International Organizations, Springer, vol. 18(4), pages 667-692, October.
    5. Baccini, Leonardo & Dür, Andreas & Elsig, Manfred, 2015. "The politics of trade agreement design: revisiting the depth-flexibility nexus," LSE Research Online Documents on Economics 62303, London School of Economics and Political Science, LSE Library.
    6. Edmund J. Malesky & Helen V. Milner, 2021. "Fostering global value chains through international agreements: Evidence from Vietnam," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 443-482, November.
    7. Jong Hee Park & Byung Koo Kim, 2020. "Why your neighbor matters: Positions in preferential trade agreement networks and export growth in global value chains," Economics and Politics, Wiley Blackwell, vol. 32(3), pages 381-410, November.
    8. John Schoeneman & Jami Fullerton, 2023. "Exploring relationships between nation branding and foreign direct investment," Place Branding and Public Diplomacy, Palgrave Macmillan, vol. 19(3), pages 266-279, September.
    9. Soo Yeon Kim & Gabriele Spilker, 2019. "Global value chains and the political economy of WTO disputes," The Review of International Organizations, Springer, vol. 14(2), pages 239-260, June.
    10. Eric Neumayer & Peter Nunnenkamp & Martin Roy, 2016. "Are stricter investment rules contagious? Host country competition for foreign direct investment through international agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 177-213, February.
    11. Ryan M. Weldzius, 2021. "The end of currency manipulation? Global production networks and exchange rate outcomes," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 514-532, November.
    12. Tarald Gulseth Berge & Øyvind Stiansen, 2023. "Bureaucratic capacity and preference attainment in international economic negotiations," The Review of International Organizations, Springer, vol. 18(3), pages 467-498, July.
    13. Josef C. Brada & Zdenek Drabek & Ichiro Iwasaki, 2021. "Does Investor Protection Increase Foreign Direct Investment? A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 34-70, February.
    14. Ka Zeng & Karen Sebold & Yue Lu, 2020. "Global value chains and corporate lobbying for trade liberalization," The Review of International Organizations, Springer, vol. 15(2), pages 409-443, April.
    15. Baccini, Leonardo & Dür, Andreas & Elsig, Manfred & Milewicz, Karolina, 2011. "The design of preferential trade agreements: A new dataset in the Making," WTO Staff Working Papers ERSD-2011-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    16. Ida Bastiaens & Evgeny Postnikov, 2020. "Social standards in trade agreements and free trade preferences: An empirical investigation," The Review of International Organizations, Springer, vol. 15(4), pages 793-816, October.
    17. Todd Allee & Manfred Elsig, 2016. "Why do some international institutions contain strong dispute settlement provisions? New evidence from preferential trade agreements," The Review of International Organizations, Springer, vol. 11(1), pages 89-120, March.
    18. Jieun Lee & Iain Osgood, 2019. "Exports, jobs, growth! Congressional hearings on US trade agreements," Economics and Politics, Wiley Blackwell, vol. 31(1), pages 1-26, March.
    19. Gamso, Jonas & Nelson, Roy C., 2019. "Does partnering with the World Bank shield investors from political risks in less developed countries?," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    20. Xing Yao & Yongzhong Zhang & Rizwana Yasmeen & Zhen Cai, 2021. "The impact of preferential trade agreements on bilateral trade: A structural gravity model analysis," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-20, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecopol:v:33:y:2021:i:3:p:415-442. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.