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

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  • 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.

Suggested Citation

  • Molly Lesher & Sébastien Miroudot, 2006. "Analysis of the Economic Impact of Investment Provisions in Regional Trade Agreements," OECD Trade Policy Papers 36, OECD Publishing.
  • Handle: RePEc:oec:traaab:36-en
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    File URL: http://dx.doi.org/10.1787/322248021805
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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,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., 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. Mahia, Ramon & de Arce, Rafael & Medina, Eva, 2014. "Assessing the future of a CSP industry in Morocco," Energy Policy, Elsevier, vol. 69(C), pages 586-597.
    5. Michael Frenkel & Benedikt Walter, 2017. "Do Bilateral Investment Treaties Attract Foreign Direct Investment? The Role of International Dispute Settlement Provisions," WHU Working Paper Series - Economics Group 17-08, WHU - Otto Beisheim School of Management.
    6. World Bank Group, 2017. "Investment Policy and Promotion Diagnostics and Tools," World Bank Other Operational Studies 28281, The World Bank.
    7. Taganov, B. & Idrisov, G., 2016. "Investment Effects of Preferential Trade Agreements: Quality Matters," Journal of the New Economic Association, New Economic Association, vol. 31(3), pages 40-65.
    8. Im, Hyejoon, 2016. "The effects of regional trade agreements on FDI by its origin and type: Evidence from U.S. multinational enterprises activities," Japan and the World Economy, Elsevier, vol. 39(C), pages 1-11.
    9. Tristan Kohl & Steven Brakman & Harry Garretsen, 2016. "Do Trade Agreements Stimulate International Trade Differently? Evidence from 296 Trade Agreements," The World Economy, Wiley Blackwell, vol. 39(1), pages 97-131, January.

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    Keywords

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

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