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Non-trade provisions in trade agreements and FDI

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  • Di Ubaldo, Mattia
  • Gasiorek, Michael

Abstract

Preferential trade agreements (PTAs) increasingly feature a variety of provisions related to economic and social rights (ESR), environmental protection (EP), and civil and political rights (CPR). In this paper we estimate the effect of the degree of legalization of PTAs in these non-trade provisions on the flow of bilateral greenfield FDI. We explore this relation in a structural gravity setting and find that all three types of non-trade provisions affect the flow of FDI negatively. This effect is driven by investments directed to middle- and low-income countries, in particular for more directly economically relevant (ESR and EP) provisions. These latter are also found to have a larger negative impact on FDI between origin-destination country-pairs which differ the most in their commitment on non-trade issues in PTAs with third parties.

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  • Di Ubaldo, Mattia & Gasiorek, Michael, 2022. "Non-trade provisions in trade agreements and FDI," European Journal of Political Economy, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:poleco:v:75:y:2022:i:c:s0176268022000246
    DOI: 10.1016/j.ejpoleco.2022.102208
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    More about this item

    Keywords

    FDI; Preferential trade agreements; Non-trade provisions; Gravity equations;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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