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Analysis of the Economic Impact of Investment Provisions in Regional Trade Agreements

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Author Info

  • Molly Lesher
  • Sébastien Miroudot

Abstract

As countries turn more to regionalism as a means of forwarding co-operation on trade rules and other areas of policymaking, rules on investment are increasingly being incorporated into regional trade agreements (RTAs). We analyse the economic consequences of including investment provisions in trade agreements by creating an index of the extensiveness of investment provisions in RTAs and then using that index in a gravity model framework of trade and investment. The results indicate that investment provisions are positively associated with trade and, to an even greater extent, investment flows. Further, we observe an insignificant effect of bilateral investment treaties on investment flows, suggesting either that substantive investment provisions in RTAs impact trade and FDI flows more profoundly, or that the combination of substantive investment rules and provisions liberalising other parts of the economy jointly impact trade and investment more significantly. The report also includes case studies that confirm that the relationship between investment and other provisions in trade agreements is complex and depends on many factors.

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File URL: http://dx.doi.org/10.1787/322248021805
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Trade Policy Papers with number 36.

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Date of creation: 11 Jul 2006
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Handle: RePEc:oec:traaab:36-en

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Related research

Keywords: foreign direct investment; trade policy; ANZSCEP; gravity model; bilateral investment treaty; NAFTA; investment; regional trade agreements;

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Cited by:
  1. Mia Mikic, 2007. "Trends in preferential trade liberalization in Asia and the Pacific," STUDIES IN TRADE AND INVESTMENT, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 1-32 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  2. Tomasz Iwanow & Colin Kirkpatrick, 2007. "Trade facilitation, regulatory quality and export performance," Journal of International Development, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(6), pages 735-753.
  3. Aradhna Aggarwal, 2008. "Regional Economic Integration and FDI in South Asia - Prospects and Problems," Macroeconomics Working Papers 22141, East Asian Bureau of Economic Research.
  4. Tristan Kohl & Steven Brakman & Harry Garretsen, 2013. "Do Trade Agreements Stimulate International Trade Differently? Evidence from 296 Trade Agreements," CESifo Working Paper Series 4243, CESifo Group Munich.

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