What do trade deals mean for FDI?

By Ben van der Merwe (2021)

Categorical claims about the impact of trade deals on FDI are not supported by the evidence, which paints a nuanced and sometimes contradictory picture.

Does investor protection increase foreign direct investment? A meta‐analysis

By Josef C. Brada, Zdenek Drabek, Ichiro Iwasaki (2020)

74 studies find robust evidence that effect of international investment agreements on foreign direct investment is so small as to be considered zero.

Assessing the impacts of investment treaties: Overview of the evidence

By Jonathan Bonnitcha | IISD (2017)

It seems that investment treaties probably do lead to a modest increase in some types of FDI to developing countries but it is unclear whether investment treaties’ impact on FDI flows constitutes a benefit to a host state. Studies to date have not been able to find conclusive evidence supporting other alleged benefits of investment treaties, such as facilitating domestic reforms or depoliticizing investment disputes. When weighing all the benefits and costs of investment treaties against each other, there is insufficient evidence to come to any overall conclusion about the net effect of investment treaties for developing countries.

Financing global development: Can foreign direct investments be increased through international investment agreements?

By Axel Berger (2015)

Recent evidence suggests that strong investor-state mechanisms do not lead to more FDI compared to treaties that omit such a clause.

Foreign Direct Investment: myths and realities

By Yilmaz Akyüz, chief economist of the South Centre (2015)

Many bilateral investment treaties include provisions that free foreign investors from the obligation of having to exhaust local legal remedies in disputes with host countries before seeking international arbitration. Most developing countries sign them on expectations that they would attract more FDI by providing foreign investors guarantees and protection. However, there is no clear evidence that bilateral investment treaties have a strong impact on the direction of FDI inflows.

Transatlantic investment treaty protection

By Lauge Poulsen, Jonathan Bonnitcha and Jason Yackee (2015)

There is little evidence to suggest that investor-state arbitration will provide the EU with meaningful benefits, such as increased foreign investment from the US. In contrast, investor-state arbitration may impose non-trivial costs, in the form of litigation expenses and reduced policy space.

Trade deals that threaten democracy

By IUF (2014)

There is no evidence to indicate that the absence of ISDS limits foreign investment. Brazil, Latin America’s largest recipient of FDI has no investment agreements which contain ISDS. The United States has no ISDS with China, which continues to receive massive investment flows.

Do bilateral investment treaties promote foreign direct investment? Some hints from alternative evidence

By Jason W. Yackee (2011)

In this article I present a multi-method examination of whether bilateral investment treaties, or BITs, are likely to promote inflows of foreign direct investment. Using regression analysis I show that BITs are not meaningfully correlated with measures of political risk, and using survey evidence I show that providers of political risk insurance do not reliably take BITs into account when deciding the terms of insurance. Nor do in-house counsel in large U.S. corporations view BITs as playing a major role in their companies’ foreign investment decisions. In contrast to existing empirical studies, which claim to prove that BITs can have massive positive impacts on FDI, my results suggest that such results are probably spurious. BITs are unlikely to be a significant driver of foreign investment.