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High-Income Developing Countries, FDI Outflows and the International Investment Agreement Regime

Published online by Cambridge University Press:  25 August 2021

Yoram Z. Haftel ,
Soo Yeon Kim  and
Lotem Bassan-Nygate
Yoram Z. Haftel*
Affiliation:
Department of International Relations, The Hebrew University of Jerusalem, Israel
Soo Yeon Kim
Affiliation:
Department of Political Science, National University of Singapore
Lotem Bassan-Nygate
Affiliation:
Department of Political Science, University of Wisconsin-Madison, USA
*
*Corresponding author: Email: yoram.haftel@gmail.com
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Abstract

The international investment agreement regime (IIA Regime) is composed of thousands of IIAs and a system of investor–state dispute settlement. Historically, high-income developing countries (HIDCs) were part of the global South and thus ‘hosts’ of foreign direct investment (FDI). Increasingly, however, these countries have become ‘home’ to investors who are hosted and exposed to political risk abroad. Representing both home and host country interests simultaneously, how do HIDCs balance these crosscutting pressures? We argue that as the position of an HIDC shifts from mostly a recipient towards a sender of significant amounts of FDI, it will be more willing to provide protection to foreign investors at the expense of state regulatory space in its IIAs, thereby increasing its exposure to the IIA Regime. Employing an original data set that measures this exposure for sixty-four HIDCs over six decades, we first show that the degree of HIDC exposure to the IIA Regime varies a great deal. Using a general method of moments (GMM) analysis and controlling for a host of confounding factors, we demonstrate that, indeed, higher levels of FDI outflows as a share of the national economy result in greater exposure to the IIA Regime.

Keywords

The IIA regimehigh income developing countriesoutwards FDI
Type
Original Article
Information
World Trade Review , Volume 21 , Issue 1 , February 2022 , pp. 1 - 17
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

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