the effect of treaties on foreign direct investment: bilateral investment treaties, double taxation treaties, and investment flows This page intentionally left blank the effect of treaties on foreign direct investment: bilateral investment treaties, double taxation treaties, and investment flows edited by karl p sauvant and lisa e sachs 1 Oxford University Press, Inc., publishes works that further Oxford University’s objective of excellence in research, scholarship, and education Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Mexico City Nairobi New Delhi Shanghai Taipei Toronto Madrid Melbourne With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Copyright © 2009 by Oxford University Press, Inc Published by Oxford University Press, Inc 198 Madison Avenue, New York, New York 10016 Oxford is a registered trademark of Oxford University Press Oxford University Press is a registered trademark of Oxford University Press, Inc All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press, Inc _ Library of Congress Cataloging-in-Publication Data The effect of treaties on foreign direct investment: bilateral investment treaties, double taxation treaties, and investment flows / edited by Karl P Sauvant and Lisa E Sachs p cm Includes bibliographical references and index ISBN 978-0-19-538853-4 ((hardback): alk paper) Investments, Foreign—Taxation—Law and legislation Double taxation Treaties I Sauvant, Karl P II Sachs, Lisa E K4528.E34 2009 332.67’3—dc22 200844052 _ Printed in the United States of America on acid-free paper Note to Readers This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is based upon sources believed to be accurate and reliable and is intended to be current as of the time it was written It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services If legal advice or other expert assistance is required, the services of a competent professional person should be sought Also, to confirm that the information has not been affected or changed by recent developments, traditional legal research techniques should be used, including checking primary sources where appropriate (Based on the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.) You may order this or any other Oxford University Press publication by visiting the Oxford University Press website at www.oup.com To Alaion Jr., Ana Maria, Clarissa, Marcelo, Samira, Tanja, and Vitor, whom I wish every success in their lives Karl To my parents Jeffrey and Sonia—my best teachers and my greatest inspiration Lisa This page intentionally left blank contents Contributors xi Foreword xxi andreas f lowenfeld Preface xxv john h dunning BITs, DTTs, and FDI flows: An Overview xxvii lisa e sachs and karl p sauvant part i: introduction A Brief History of International Investment Agreements kenneth j vandevelde The Framework of Investment Protection: The Content of BITs 37 peter muchlinski Explaining the Popularity of Bilateral Investment Treaties 73 andrew t guzman Double Tax Treaties: An Introduction 99 reuven s avi-yonah part ii: exploring the impact of bilateral investment treaties on foreign direct investment flows Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain 109 jeswald w salacuse and nicholas p sullivan Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis 171 tim büthe and helen v milner Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries? 225 eric neumayer and laura spess The Impact of Bilateral Investment Treaties on Foreign Direct Investment 253 peter egger and michael pfaffermayr New Institutional Economics and FDI Location in Central and Eastern Europe 273 robert grosse and len j trevino viii contents 10 Do Investment Agreements Attract Investment? Evidence from Latin America 295 kevin p gallagher and melissa b.l birch 11 The Global BITs Regime and the Domestic Environment for Investment 311 susan rose-ackerman 12 The Impact on Foreign Direct Investment of BITs 323 unctad 13 Do Bilateral Investment Treaties Attract FDI? Only a Bit And They Could Bite 349 mary hallward-driemeier 14 Do BITs Really Work?: Revisiting the Empirical Link between Investment Treaties and Foreign Direct Investment 379 jason yackee 15 Bilateral Investment Treaties and Foreign Direct Investment: Correlation versus Causation 395 emma aisbett 16 Why Do Developing Countries Sign BITs? 437 deborah l swenson part iii: exploring the impact of double taxation treaties on foreign direct investment flows 17 Do Bilateral Tax Treaties Promote Foreign Direct Investment? 461 bruce a blonigen and ronald b davies 18 The Effects of Bilateral Tax Treaties on U.S FDI Activity 485 bruce a blonigen and ronald b davies 19 The Impact of Endogenous Tax Treaties on Foreign Direct Investment: Theory and Empirical Evidence 513 peter egger, mario larch, michael pfaffermayr and hannes winner 20 Host-Country Governance, Tax Treaties, and U.S Direct Investment Abroad 541 henry j louie and donald j rousslang 21 Tax Treaties for Investment and Aid to Sub-Saharan Africa: A Case Study 563 allison christians 22 It’s All in the Timing: Assessing the Impact of Bilateral Tax Treaties on U.S FDI Activity 635 daniel l millimet and abdullah kumas contents ix 23 Do Double Taxation Treaties Increase Foreign Direct Investment to Developing Countries? 659 eric neumayer part iv: exploring the impact of tax and foreign investment treaties on foreign direct investment flows 24 The Effect of Tax and Investment Treaties on Bilateral FDI Flows to Transition Economies 687 tom coupé, irina orlova and alexandre skiba Selected Bibliography on Bilateral Investment Treaties and Double Taxation Treaties 715 lisa e sachs Index 725 718 lisa e sachs —— (2008) “International investment agreements: a survey of environmental, labour and anti-corruption issues,” (prepared by Kathryn Gordon and Monica Bose), in OECD, International Investment Law: Understanding Concepts and Tracking Innovations (Paris: OECD) —— (2006) “Novel features in recent OECD bilateral investment treaties,” (prepared by Marie-France Houde), in OECD, International Investment Perspectives (Paris: OECD) —— (2005) “ ‘Indirect expropriation’ and the ‘right to regulate’ in international investment law,” (prepared by Catherine Yannaca-Small), in OECD, International Investment Law: A Changing Landscape (Paris: OECD) —— (2005) “Fair and equitable treatment standard in international investment law,” (prepared by Catherine Yannaca-Small), in OECD, International Investment Law: A Changing Landscape (Paris: OECD) —— (2005) “Most-favoured nation treatment in international investment law,” (prepared by Marie-France Houde and Fabrizio Pagani), in OECD, International Investment Law: A Changing Landscape (Paris: OECD) —— (2004) “Relationships between international investment agreements,” (prepared by Marie-France Houde and Catherine Yannaca-Small), in OECD, International Investment Perspectives (Paris: OECD) Parra, Antonio R (2000) “ICSID and bilateral investment treaties,” News from ICSID, 52 Pekar, Rostislav and Ondre Sekanina (2007) “China’s bilateral investment treaties with EU member states: gaining a competitive advantage through investment protection,” China Law & Practice, 21(7), pp 31–33 Peters, Paul (1998) “Some serendipitous findings in BIT’s: the Barcelona Traction Case and the reach of bilateral investment treaties,” in E Denters and N Schrijver, eds., Reflections on International Law from the Low Countries (The Hague: Kluwer) —— (1991) “Dispute settlement arrangements in investment treaties,” Netherlands Yearbook of International Law, 22 Peterson, Luke E (2004) Bilateral Investment Treaties and Development Policy-Making (Winnipeg: International Institute for Sustainable Development) Pilch, Gennady (1992) “The development and expansion of bilateral investment treaties,” American Society of International Law Proceedings, 86 Radi, Yannick (2007) “The application of the most-favoured-nation clause to the dispute settlement provisions of bilateral investment treaties: domesticating the ‘trojan horse,’” European Journal of International Law, 18, p 757 Reinisch, August, ed (2008) Standards of Investment Protection (Oxford: Oxford University Press) Robbins, Joshua (2006) “The emergence of positive obligations in bilateral investment treaties,” University of Miami International and Comparative Law Review, 13, p 403 Sacerdoti, Giorgio (1998) “Bilateral treaties and multilateral instruments on investment protection,” Receuil des Cours, 21(7), p 251 —— (2000) “The admission and treatment of foreign investment under recent bilateral and regional treaties,” Journal of World Investment, 1, p 105 —— (2004) “Has the proliferation of BITs gone too far? 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“Travelling the BIT route: of waiting periods, umbrella clauses and forks in the road,” The Journal of World Investment & Trade, 5(2), p 231 Siqueiros, Jose Luis (1994) “Bilateral treaties on the reciprocal protection of foreign investment,” California Western Iinternational Law Journal, 24, p 255 Sornarajah, M (1986) “State responsibility and bilateral investment treaties,” Journal of World Trade Law, 20, p 79 Srur, Muradu A (2004) “The international investment regime: towards evolutionary bilateral and regional investment treaties?” Manchester Journal of International Economic Law, 1, p 54 Suda, Ryan (2006) “The effect of bilateral investment treaties on human rights enforcement and realization,” in Olivier De Schutter, ed., Transnational Corporations and Human Rights (Oxford: Hart Publishing) Tobin, J and Susan Rose-Ackerman (2005) “Foreign direct investment and the business environment in developing countries: the impact of bilateral investment treaties,” Yale Law School, Economics 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treaty interpretation,” Bulletin for international fiscal documentation, 54(12), p 612 Wälde, Thomas and Abba Kolo (2007) “Investor-state disputes: the interface between treaty-based international investment protection and fiscal sovereignty,” Intertax, 35, p 424 —— (2008) “Economic crisis, capital transfer restrictions and investment protection under modern investment treaties,” Capital Market Law Journal, 3(2), p 154 724 lisa e sachs Ward, David A (1993) “Abuse of tax treaties,” in H Alpert and Kees van Raad, eds., Essays on International taxation (Deventer; Boston: Kluwer Law and Taxation Publishers) —— (2005) The Interpretation of Income Tax Treaties with Particular Reference to the Commentaries on the OECD Model (Kingston, Ont.: International Fiscal Association) —— (2006) “The role of the commentaries on the OECD Model in the tax treaty interpretation process,” Bulletin for international taxation, 60(3), p 97 Wattel, P J and O Marres (2003) “The legal status of the OECD commentary and static or ambulatory interpretation of tax treaties,” European Taxation, 43(7/8), p 222 index A AALCC See Asian-African Legal Consultative Committee Agreement on Trade Related Investment Measures, 20–21, 231 Andean Free Trade Agreement, 297 Arbitration ad hoc, 66, 131–132 binding, provisions, 74, 91,183, 185–187, 212, 353, 380 and BIT clauses and provisions, 18, 28, 172, 210, 312, 381 BIT critics and, 155 BITs as customary law and, 157 choice between ICSID and, 67 compulsory, 131, 188 consent to international, 56 costly, 29, 313 direct investor-state dispute mechanisms and, 395 extra national, 398–399 ICSID, 19, 68, 131–132, 175, 185, 187, 353, 380–381, 398 in Latin American countries, non-binding, 104 OECD model of, 104 panels, 183–184, 188, 205, 210 securing international, 58, 112 under investor-state treaty, 30, 32, 398, 423 under NAFTA, 48 under UNCITRAL rules, 48–49, 66, 132, 398 unfair and inequitable treatment in, 48–49 Asian-African Legal Consultative Committee, 47 model “A” BIT, 60–62 model “B” BIT, 62 model treaties, 47 B Bilateral investment treaties, alternatives to, 382–383 arbitration under, 381 associated with large increases in foreign investment, 440 basic structure of, 123 binding investor-to-state dispute settlement provisions under, 230 commitment to investment protection of, 15 compensation for expropriation under, 61–64 compensation for losses due to armed conflict or internal disorder under, 61 compliments to good institutional quality, 226 conditions to stimulate foreign direct investment and, 311–312 content of, 37–71 core elements, 296 cross sectional analysis of FDI inflows under, 233 customary international law and, 156–158 defined, 109–110, 352–355 design of, 253 in developed countries, 13 discriminatory treatment against foreign investors in, 230 disputes between the contracting parties under, 66–67 dispute settlement clauses and procedures contained in, 65, 439 dominant vehicle through which investment is regulated, 73–75 early, 67 econometric research study of, 140–143 effective resolution of credible commitment problems and, 382 effect of, on FDI location, 225–227 effect of, on foreign direct investment, 188–190 efficiency implications of, 91–93 evaluation of, 109–110 ex ante information and, 184 726 index Bilateral investment treaties, (cont.) ex post enforcement and, 186–188 ex post information and, 185–186 failure to negotiate a multilateral agreement on investment and, 317–320 FDI related issues regulated by, 253 first, 253 and foreign direct investment increases to developing countries, 225–252 free trade agreements, 297 free transfer of payments under, 59–61 general principles of law of, 158–159 government policies and, 231 history of, 317–320 impact of, 75, 93–96, 147–155, 253–272 impact of, on customary international law, 75, 93–96 impact of, on general nondiatic FDI inflows, 232–233 impact on foreign direct investment flows, 109–394 importance of institutions and property rights and, 356–359 important instrument of protection to foreign investors, 231 incorporation of international dispute resolution mechanisms for, 395–596 increased global efficiency, 75 international arbitration and, 230–231 international arbitration under, 19 international investment insurance and, 382–383 international legal instrument, 109 investment contracts and, 382 investment promotion under, 138–140 inward flow of FDI and, 225–227 lack of investor awareness of, 381–383 large FDI inflows and, 225–227 marginal impact of, 311–312 method of governing relationship between investors and governments, 74–75 model, 30 modern, 115 as most common type of international investment agreement, 37 most economically important aspect of, 395 most favored nation treatment under, 17 movement, 110–113 national treatment under, 17 network of, 15–16 objectives of, 109 observance of obligations under, 54–59 popularity of, 73–97, 228 potential endogeneity of, 396–397 as a potent tool for attracting FDI, 311–312 primary purpose of, 114–115 prior United Nations studies of, 143–147 programs, 14 property rights and, 352–355 protected tariffs of tax incentives for foreign investors and, 231 for protecting and influencing foreign investment, 109 protections provided by, 16 provisions on common set of investment issues of, 438–443 purpose of, 225–227 rise to prominence of the, 74–75 risk of investment and, 313–314 role of, in promoting FDI, 227 signaling effect of, 312–313 signing, 439–457 specific standards of treatment under, 59–75 studies of, location of FDI, 232–234 trends in, 355–356 uniformity across countries, 296 welfare implication of, 93 Bilateral investment treaties, core elements of, 296 Bilateral investment treaties and foreign direct investment alternative estimation techniques for statistical analysis of, 200–202 causation between, 395–398 correlation between, 395–398 empirical findings from monadic analysis concerning, 179–180 empirical models of, 176–178 political analysis of, 171– 224 political theory of, 180–184 statistical analysis of, 190–196 statistical findings of, 196–199 index 727 studies on the effect of, on foreign direct investment, 173–176 Bilateral investment treaties as means of attracting foreign investment as a commitment device, 350–352 studies on growth and investment relating to, 351–352 Bilateral investment treaty movement development of the, 114 evolution of the, 113–118 goals of the, 118–122 history of the, 110–113 impetus for the, 110 in the late 1980s 117 new face in the history of the, 117–118 Bilateral investment treaty regime, 60, 88–89, 91–93, 120, 210, 311–321 global, 27, 311–321 rise of the, 312, 317–320 Bilateral investment, treaty signing and analysis exploring the economic effects of, 440–443 countries, 443–448 developing countries and, 440–443 economic determinants including FDI stocks and flows of, 449–450 economic determinants of, 444–448 economic evidence on value of, 452–453 the effect of country identity and, 451 effect on FDI flows, 453–455 effects of, 440–443 empirical results of, 444–448 identifying economic effects of, 450 interpretation of further issues on, 455–457 investment liberalization and, 441–442 leads and lags in investment reactions and, 451 values of, 452–455 Bilateral investment treaty structure compensation for losses from armed conflict or internal disorder, 129–130 conditions for the entry of foreign investments, 126 general standards of treatment of foreign investment, 126–128 investment dispute settlement 130–133 monetary transfers, 128–129 operational conditions, 129 protection of dispossession, 130 scope of application, 123–125 Bilateral tax treaties, 461–466 Bilateral treaties, availability of, as commitment mechanism, 318 bilateral flows based on signed, 359 Bilateral Treaties of Friendship, Commerce and Navigation, 4, colonial era, investment protection for, 10 modern, 17 most favored nation treatment and, 17 national treatment and, 17 postwar, 8–10 submission of disputes to an ad hoc arbitral tribunal under, 17 Bilateral treaty making, 115–117 BIT See Bilateral investment treaties C Calvo Doctrine defined, end of, 22 Latin America and, Central American Free Trade Agreements (CAFTA), 297 Charter of Economic Rights and Duties of States (CERDS), 12 adoption of, 14 creation, 12 expropriation issues and, 14 regime, 87–88, 92–93 Credible commitments ability of political institutions to make, 236, 670–671 to attract more foreign direct investment, 85, 215, 229, 289 bilateral investment agreements as, 206–207, 211–213, 318, 380–382, 389 contractual, 90 cost of, 91 customary law and, 91 dynamic inconsistency problem and, 91 lack of, 92 liberal economic policies defined as, 182 logic of, 176 mechanism, 82, 92, 206 728 index Credible commitments (cont’d ) problems with, 217, 382 to property rights, 314 risk premium of, 382 Customary international law, 5, 30–31 Calvo clause in, deficiencies of, 13 under the Hull Rule, 75 lack of consensus on, 118–119 as a means of protecting international investment, 13–14 D Developing countries aggregate FDI flows to, 160–161 arbitration in, 155–156 BITs as investment vehicles that promote FDI in, 225–250 BITs concluded by, 356–357 capital importing, 26–27, 689–690 competing for FDI, 350–352, 437–443 credible commitment by, 312 DTTs and, 659–679 decolonized, 111 economic determinants of BIT signing by, 445–449 effect of BITs on inward FDI flows to, 197 expropriation, privatization and harassing of FDI issues in, 130, 134, 312, 318 FDI as a percentage of gross capital formation in, 441 FDI flows towards, 21, 73–74,147–148, 165, 169, 175–176, 313, 359, 440, 687–692 FDI in and among, 357, 362, 441 FDI inward flows to See Developing countries, FDI flows towards FDI regime and, 320–321 growth of BITs and FDI in, 118, 439 increased use of BITs between, 71 integration agreements between, 52 liberalization of, 119, 133, 136 literature and studies on, 356–358 national or most favored nation treatment in, 128 OECD countries and, 177, 317, 355, 359 368, 374, 376, 692 popularity of BITs in, 313 private market for credit and, 21–22 property rights in, 175, 362 protection of FDI in, 176 rule of law in, 172, 177 share of FDI to, 359–360 socialist countries and, 12 sovereignty issues and investment in, 29–30, 112–113 statistical analysis of FDI flows to, 190–217 tax treaties with the U.S signed by, 616 trade between developed countries and, 36 U.S FDI flows to, 141, 177–178, 204, 692 Developed countries, 13 capital exporting, 120, 232, 679–680 DDTs and, 572, 662–666, 669, 679, 615, 626 development aid from, 227, 661 as dominant source and major recipient of FDI, 227, 661 dyadic sample of, 667 FDI and, 194 investment treaties signed between, 118, 120 liberal market model in, 119 OECD model treaty and, 602 tax issues in, 580, 582, 604, 606, 609, 616, 632–633 total number of BITs in force in, 313 Dispute resolution fora (forum), 172 international, 395 investor-state, 23, 29, 395–396 mechanisms, 315, 350, 353, 395–398 procedures, 353 provisions in FCNs, 9–10 WTO system of, 64–65 Doha Round of Multilateral Trade Negotiations, 34 declaration, 442 investment agreements and the, 34, 442 negotiation of a MIA during the, 34, 155–156, 442 statement, 20, 442 Double taxation treaties defined, 690 index 729 developing countries and, 659, 679–680 exploring the impact or effect of, on FDI flows, 461–538, 659–660, 665–667 and FDI, 660–665 growth of, 660 introduction, 99–106 models, 99–101 network, 99, 101,104, 660 number of, concluded 1990–2004, 711 number of, with OECD countries, 681, 710 OECD model of, 99–101 statistical analysis of, 667–679, 690 timing of, effect of FDI flows, 708 United Nations model, 99–101 web, 99, 101,104, 660 Dynamic inconsistency problem defined, 78 developing nations attempting to attract FDI and, 230 efficiency and, 82–83 and foreign direct investment, 78–79 global perspective of, 82 host country and, 82 impact of, 82 reputational effect of, 82 E Espousal, 19 as a customary law mechanism, defined, as a diplomatic process, as a dispute resolution mechanism, 112 procedure, 5–6 satisfactory resolution of, 5–6 Economic integration, 35 agreements, 25 in the past, 26 regional and interregional, 26 Effect of bilateral investment treaties on foreign direct investment See Impact of bilateral investment treaties on foreign direct investment Effect of bilateral tax treaties See impact of bilateral investment treaties on foreign direct investment Empirical methodology and data to estimate the effect of BITs, 491–496 Empirical link between investment treaties and foreign direct investment econometric analysis of the, 379–383 revisiting the 379–392 Endogenous tax treaties, 513–516 F FCN See Bilateral Treaties of Friendship, Commerce and Navigation Foreign direct investment (FDI) balancing financial accounts and, 295 bilateral outward stocks, 258 Central and Eastern Europe, 273–391 dynamic inconsistency and, 78–79 economic benefits, 437 effect of taxation on, 461–466 empirical studies of the effects of taxation on, 485 flows, 73–74 global flows of, 73–74 growth and growth rates, 395 how treaties affect, 467–469 impact of BITs on, 312–314 impact of endogenous tax treaties on, 513–516 key determinants of, 298–302 location, 273–291 negotiating BITs as a strategy to attract, 287 nominal outward stocks, 258 outward stocks, 255, 258 protection of, 4–7 regulations on, 287 response to tax incentives of, 461–466 studies concerning extent of FDI response to tax incentives, 461–466 vertical, 254–256 Foreign direct investment flows global, 273 inward, 273–276, 311–312 Foreign investment alternatives to, 21 developing countries, 11–12 form of neocolonialism, 11 Germany and, 13 liberalization of, political risks of, 14 protection of, socialist block and the Soviet Union, 11 730 index Fourth Ministerial Meeting, Doha, 2001 See Doha Round Free Trade Agreements, 32 G GATS See General Agreement on Trade in Services GATT See General Agreement on Tariffs in Trade General Agreement on Tariffs and Trade 6, 10 framework, as a trade negotiations forum, trade relations and, General Agreement on Trade in Services 20 Good neighbor policy, See also Roosevelt Administration H Havana Charter, 114 See also International Trade Organization Hull Rule customary international law and, 75 fall of,76–78 international community and, 79 international law and, 79 opposition to, 74–75 protection for foreign investors and, 228 I International investment agreement, 3, 37 changes in, 19 colonial era, 3–6 content of, 34 covered persons and entities under, 42–45 definition of investments covered by, 39–40 divorced from the concept of liberalization, 35 fair and equitable treatment under, 46–52 first historical era of, 3–6 framework of, 28 general standards of treatment in, 46 global era, 19–28 history of, 3–35 increasingly universal, 35 major and most common provisions in, 37–38 postcolonial era, 3, 7–19 preambles to, 38 principle provisions of, 37–38 as a protection against political risk, 35 provisions defining the scope of application of the treaty, 39–46 standards of treatment to be applied to, 46 subject matter covered in, 39–42 temporal application, 45–46 territorial scope of, 45 ICRG See International Country Risk Guide ICSID See International Centre for Settlement of Investment Disputes, 19 IIA See International investment agreement IMF See International Monetary Fund Impact of bilateral investment treaties on FDI, 485–487 analysis of time series data to determine the, 326–331 caveats concerning the, 323–324 change in the exchange rate as a variable in determining the, 333 country risk as a variable in determining the, 334 cross sectional analysis to determine the, 331–337 evidence regarding the, 396–398 inflation as a variable in determining the, 333 literature on, 253–355 market size and growth as a variable in determining the, 332–333 other variable in determining the, 334–335 rate of capital formation as variable in determining the, 333–334 statistical analysis of the, 323, 326–348 theoretical considerations surrounding the, 324–326 Intellectual property rights, 21 International Centre for Settlement of Investment Disputes, 19 International Country Risk Guide (as an index of political risk), 315 index 731 International Court of Justice Barcelona traction case and the, 110–113 submission of disputes to, 17 International investment colonial era, protection of, regime, International investment law bilateral investment treaties and, 109–110 historical development of, 115 modern, 115 transformation of, 109–110 International investment regime, 35 colonial era, features of, postcolonial era, 10 trade and property, treaty-based, 32–33 virtually universal, 35 International law, 91–96 International legal framework, 115 International Monetary Fund, 60 International Trade Organization, 114 International trade relations, Investment protection, 19, 37–71 Investor-host conflicts, 75 Investor protection regime See Regime, Investor protection K Key determinants of foreign direct investment analysis of, 323–326 in developing countries, 297–303 difference between sub-regions, 308 econometric model to identify, 303–305 factor endowments as one of, 298 factors relating to geography as one of, 299–300 factors relating to infrastructure as one of, 299–300 importance of, 323 in Latin America and the Caribbean, 305–308 literature on, 297–302 macroeconomic stability of one of, 298–299 market size as one of, 298 policy environment as one of, 299 political stability as one of, 299 privatization as one of, 302 substantial differences in, 308 value of BITs and, 314 L Least Developed Countries (LDC), 76–91 behavior of the, 83–85 collective interests of the, 86–88 conduct of the, 88–90 in early 1960s, 77 economic interpretation concerning, 90–91 interests of individual, 85–86 paradoxical behavior of the, 83–91 strategic analysis of, 85–88 Liberalization See Market liberalization M MAI See Multilateral Agreement on Investment, 33 Market liberalization an absolutist evaluation of, 134–136 investment and, 133–134 a relativist evaluation of, 136–138 trend toward, 23 MFN See Most favored nation Military Action See Military force Military force, 19 to collect debts, 13 as a legitimate means of protecting country’s interests, 35 to protect investment, 13, 19 use of, 13 MNE See Multinational enterprises Monroe Doctrine, Most favored nation, obligations, 30 treatment, 4, 16 Multilateral Agreement on Investment, 33 Multilateral agreements, Multilateral investment agreement, 312, 317–320 Multinational enterprises, 70 horizontal, 254 institutional environment and, 275 investment strategy and, 275 vertical, 254 732 index N NAFTA See North American Free Trade Agreement National treatment,16 New institutional economics and foreign direct investment bilateral investment treatments concerning, 278–279 corruption and, 277–278 currency evaluation and, 281–282 FDI control variables and, 280–287 literature on the, 276–277 market size and the, 282–283 political risks inherent to the, 280 privatization and the, 279–280 regulations on the, 279 rule of law and the, 283 statistical results concerning, 285–287 theory on, 276–280 New International Economic Order, 12 adoption of, 14 declaration of, 12 discussions of a, 22 NIEO See New International Economic Order North American Free Trade Agreement, 25–28 arbitral decisions under the, 47 chapter eleven, 26, 231 interpretive notice under, 31 investment protection provisions under, 231 investment related provisions of, 26 section on investment, 117 O Office of Investment Affairs, Bureau of Economic Business Affairs, 253–254 Organisation for Economic Co-operation and Development (OECD), 114 P Postcolonial era See International investment agreement, history of Promotion of foreign direct investment effect of bilateral tax treaties on the, 469–474 empirical framework for statistical analysis of the, 467–469 statistical analysis and results of the, 474–481 Property protection provisions 6, Protectionist policies, R Regional trade agreements, 23 S Socialist countries, 12 Standard of expropriation, 15–16 T Tax treaties bilateral, 487–491 functions of, 487–491 history of, 487–491 list of United States, 489 primary functions of, 488–490 primary goal of, 485–486 process of creating, 487–491 Theoretical trade literature 254 Trade liberalization Trade protection provisions 6, Trade-Related Investment Measure (TRIM), 137–138 Transition countries, 266–267 U United Nations Conference on Trade and Development (UNCTAD), 254 U.S bilateral investment treaty program basic aims, 253–254 fact sheet, 253 W World Trade Organization (WTO), 20 .. .the effect of treaties on foreign direct investment: bilateral investment treaties, double taxation treaties, and investment flows This page intentionally left blank the effect of treaties on. .. swenson part iii: exploring the impact of double taxation treaties on foreign direct investment flows 17 Do Bilateral Tax Treaties Promote Foreign Direct Investment? 461 bruce a blonigen and ronald... davies 18 The Effects of Bilateral Tax Treaties on U.S FDI Activity 485 bruce a blonigen and ronald b davies 19 The Impact of Endogenous Tax Treaties on Foreign Direct Investment: Theory and Empirical