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Investment Discrimination and the Proliferation of Preferential Trade Agreements

Author

Listed:
  • Leonardo Baccini

    (Department of International Relations, London School of Economics & Political Science, London, UK)

  • Andreas Dür

    (Department of Political Science, University of Salzburg, Salzburg, Austria)

Abstract

The proliferation of bilateral and regional trade agreements has arguably been the main change to the international trading system since the end of the Uruguay Round in the mid-1990s. We argue that investment discrimination plays a major role in this development. Preferential trade agreements can lead to investment discrimination because of tariff differentials on intermediary products and as a result of provisions that relax investment rules for the parties to the agreement. Excluded countries are sensitive to the costs that this investment discrimination imposes on domestic firms and react by signing a trade agreement that aims at leveling the playing field. We test our argument using a spatial econometric model and a newly compiled data set that includes 166 countries and covers a period of eighteen years (1990–2007). Our findings strongly support the argument that investment discrimination is a major driver of the proliferation of trade agreements.

Suggested Citation

  • Leonardo Baccini & Andreas Dür, 2015. "Investment Discrimination and the Proliferation of Preferential Trade Agreements," Journal of Conflict Resolution, Peace Science Society (International), vol. 59(4), pages 617-644, June.
    • Handle: RePEc:sae:jocore:v:59:y:2015:i:4:p:617-644
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