Martin Roy

Do trade and investment agreements lead to more FDI? Accounting for key provisions inside the black box

The previous literature provides a highly ambiguous picture on the impact of trade and investment agreements on FDI. Most empirical studies ignore the actual content of BITs and RTAs, treating them as black boxes, despite the diversity of investment provisions constituting the essence of these agreements. We overcome this serious limitation by analyzing the impact of modalities on the admission of FDI and dispute settlement mechanisms in both RTAs and BITs on bilateral FDI flows between 1978 and 2004. We find that FDI reacts positively to RTAs only if they offer liberal admission rules. Dispute settlement provisions play a minor role. While RTAs without strong investment provisions may even discourage FDI, the reactions to BITs are less discriminate with foreign investors responding favourably to the mere existence of BITs.

Opening markets for trade in services : countries and sectors in bilateral and WTO negotiations

Foreword Pascal Lamy Summary and overview Juan A. Marchetti and Martin Roy Part I. From Policy to Negotiations: 1. Services trade and growth Bernard Hoekman and Aaditya Mattoo Part II. Multilateral and Bilateral Negotiations on Services: Overall Perspectives: 2. Services liberalization in the WTO and in preferential trade agreements Juan A. Marchetti and Martin Roy 3. Preferential trade agreements in services: friends of foes of the multilateral trading system? Carsten Fink Part III. Challenges, Issues and Opportunities in Services Sectors: 4. Telecommunications: Can trade agreements keep up with technology? L. Lee Tuthill and Laura B. Sherman 5. Liberalization of cross-border trade in services: a developing country perspective Sumanta Chaudhuri and Suparna Karmakar 6. Out of stock or just in time? Doha and liberalization of distribution services Martin Roy 7. Air transport liberalization: a world apart Pierre Latrille 8. Financial services liberalization in the WTO and preferential trade agreements Juan A. Marchetti 9. Beyond the main screen: audiovisual services in PTAs Martin Roy 10. Liberalization of postal and courier services: ready for delivery? Ruosi Zhang 11. Liberalization of energy services: are PTAs more energetic than the GATS? Mireille Cossy 12. Market access for government procurement of services: comparing recent PTAs with WTO achievements Robert D. Anderson and Anna Caroline Muller 13. A warmer welcome? Access for natural persons under preferential trade agreements Antonia Carzaniga Part IV. Country Experiences with Services Trade: 14. GATS plus or minus? Services commitments in comparative contexts for Colombia and Uruguay J. P. Singh 15. Opening services markets at the regional level under the CAFTA-DR: the cases of Costa Rica and the Dominican Republic Maryse Robert and Sherry Stephenson 16. Why isnt South Africa more pro-active in international services negotiations? Peter Draper, Nkululeko Khumalo and Matthew Stern 17. Services liberalization in PTAs and the WTO: the experiences of India and Singapore Arpita Mukherjee 18. The domestic dynamics of preferential services liberalization: the experience of Australia and Thailand Malcolm Bosworth and Ray Trewin 19. The Chilean experience in services negotiations Sebastian Saez 20. Appendix: a readers guide to basic GATS concepts and negotiations.

More Stringent BITs, Less Ambiguous Effects on FDI? Not a Bit!

We focus on investor-state dispute settlement provisions contained in various, though far from all, bilateral investment treaties as a possible determinant of BIT-related effects on bilateral FDI flows. Our estimation results prove to be sensitive to the specification of these provisions as well as the inclusion of transition countries in the sample. Stricter dispute settlement provisions do not necessarily result in higher FDI inflows so that the effectiveness of BITs as a credible commitment device remains elusive.

Turning Hills into Mountains? Current Commitments under the GATS and Prospects for Change

Over the past months, it has become increasingly clear that the services negotiations under the Doha Development Agenda will not produce significant improvements on current commitments unless major new impetus is provided. In an introductory section, this paper discusses various impediments, from the perspective of participating governments, that may explain the lack of negotiating momentum to date. It then provides an overview of existing commitments under the GATS (by sector, mode of supply, and level of development) and of the initial offers that had been tabled by early 2005. Despite the substantial benefits that may be associated with the liberalization of services trade, the GATS has obviously not yet lived up to ambitious expectations. For example, on average across all WTO Members, only one-third of all services sectors have been included in current schedules of commitments; and many entries have been combined with significant limitations on market access and national treatment or with the complete exclusion of particular types of transactions (modes of supply) from coverage. While the ongoing services negotiations provide an opportunity to complement the rule-making efforts of the Uruguay Round with genuine market opening, many governments apparently have found it difficult, despite generally more restrictive access regimes and, thus, potentially higher gains from liberalization than in merchandise trade, to undertake or envisage economically significant bindings across a broad range of services. Five years after the inception of the services round, current negotiating arrangements, based mainly on (bilateral) exchanges of requests and offers, may need to be complemented by common points of reference to provide greater focus and guidance.

Services Commitments in Preferential Trade Agreements: An Expanded Dataset

Preferential trade agreements (PTAs) on services have proliferated since 2000. This working paper briefly presents the expansion of the dataset initially developed in Marchetti and Roy (2008). The data permits to assess the extent to which market access commitments undertaken by WTO Members in PTAs go beyond GATS commitments and offers made in the context of the Doha Development Agenda. The dataset, which covers PTA commitments of 53 WTO Members (counting EU Members States as one), is available at: http://www.wto.org/english/tratop_e/serv_e/dataset_e/dataset_e.htm

Are stricter investment rules contagious? Host country competition for foreign direct investment through international agreements

We argue that competitive diffusion is a driver of the trend toward international investment agreements (IIAs) with stricter investment rules, namely defensive moves of developing countries concerned about foreign direct investment (FDI) diversion in favor of competing host countries. Accounting for spatial dependence in the formation of bilateral investment treaties (BITs) and preferential trade agreements (PTAs) that contain investment provisions, we find that the increase in agreements with stricter provisions on investor-state dispute settlement and pre-establishment national treatment is a contagious process. Specifically, a developing country is more likely to sign an agreement with weak investment provisions if other developing countries that compete for FDI from the same developed country have previously signed agreements with similarly weak provisions. Conversely, contagion in agreements with strong provisions exclusively derives from agreements with strong provisions that other FDI-competing developing countries have previously signed with a specific developed source country of FDI.

FOG in GATS commitments – why WTO Members should care

The entry into force of the General Agreement on Trade in Services in 1995 marked a new stage in the history of the multilateral system. Given the peculiarities of services trade, the Agreement contains a variety of conceptual innovations, including its extension to transactions (modes of supply), beyond conventional cross-border trade, and various types of non-tariff restrictions. In turn, the new concepts needed time to be absorbed by the ministries and agencies involved, many of which might have been surprised by ‘their’ sectors being covered by a trade agreement and the ensuing government-internal coordination needs. Thus, understandably, the schedules that emerged from the Uruguay Round, which still account for the majority of current commitments, contain a variety of ill-specified entries. Such entries undermine the transparency and predictability of market conditions, thereby affecting trade and investment decisions in services. Poorly specified commitments also give rise to trade disputes. While the scheduling conventions agreed for the Doha Round provided for technical refinements that would leave the substance of commitments unchanged, this possibility was used far more sparingly than could have been expected. Moreover, additional flaws would have been introduced if some of the (preliminary) offers had entered into effect. The following discussion tries to explain the scope for refinements and develop a clearer picture of the commitments warranting correction – whether in the form of a final Doha Round outcome or through negotiation-independent action by WTO Members.

Attracting FDI Through BITs and RTAs: Does Treaty Content Matter?

It may appear all too obvious that the extent to which foreign direct investment (FDI) is attracted by bilateral investment treaties (BITs) and regional trade agreements (RTAs) depends on the strength of key investment provisions. Still, BITs and RTAs have typically been treated as black boxes in prior empirical literature, ignoring two important legal innovations: investor-state dispute settlement (ISDS) and re-establishment national treatment (NT) provisions. An assessment of the impact of different classes of BITs and RTAs on bilateral FDI flows between up to 28 home and 83 developing host countries (covering the period 1978-20042) yields strong evidence that liberal admission rules promote bilateral FDI.

Fog in GATS commitments: Boon or bane?

The creation of the General Agreement on Trade in Services (GATS), in the Uruguay Round, and its entry into force in 1995 marked a new stage in the history of the multilateral system. It was motivated essentially by the rapid expansion of international services trade within an increasingly open environment in many countries. Given the peculiarities of services trade, including the intangible nature of the products concerned and the need for direct contact between supplier and user in many cases, the Agreement contains a variety of conceptual innovations, including its extension to modes of supply beyond conventional cross-border trade (consumption abroad, commercial presence, and presence of natural persons) and its coverage, and legitimization, of various types of non-tariff restrictions. In turn, the new concepts needed time to be absorbed by the ministries and agencies involved in services trade. Further, the positive-list, or bottom-up, approach to scheduling trade commitments under the GATS meant that great flexibility was given to Members in selecting the sectors concerned and specifying the levels of access provided under individual modes. Thus, not surprisingly, the schedules that emerged from the Uruguay Round, which still account for the majority of current commitments, contain a variety of unclear or superfluous entries that may cause interpretation problems. Their solution could contribute significantly to the clarity and comparability of access obligations across sectors and WTO Members. The scheduling conventions agreed for the Doha Round thus provide specifically for the possibility of technical refinements that leave the substance of commitments unchanged. However, not only was this possibility used more sparingly to date than might have been expected, but additional flaws would be introduced if some current offers were to enter into effect. The following discussion, with a focus on a particular group of entries (market access via commercial presence), tries to explain the scope for such refinements and develop a clearer picture of the areas where further action might be needed.

Do WTO+ commitments in services trade agreements reflect a quest for optimal regulatory convergence? Evidence from Asia

Literature examining WTO+ commitments in services trade agreements (STAs) has not considered the role of services regulation. We bridge this gap using a sample of 15 South/South†East Asian countries, given the burgeoning trend of Asian economies towards services preferentialism and the largely WTO+ nature of their preferential services commitments. Our empirical findings suggest that Asian trading dyads with regulatory frameworks that are more similar and more trade restrictive tend to undertake higher levels of WTO+ commitments in their STAs. There is also evidence in our results, including by modes of supply, for WTO+ commitments in Asian STAs being driven by goods trade complementarities, alluding to supply chain dynamics in the region. Such results support the hypothesis that the heightened “servicification†of production generates a demand to lower services input costs arising from regulatory incidence and heterogeneity.