Deep Trade Agreement and Foreign Direct Investments
Preferential trade agreements are growing in number and deepening in content by incorporating disciplines that go beyond market access. They increasingly encompass non-trade-related disciplines as diverse as intellectual property rights, environmen...
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/undefined/750331635791488049/Deep-Trade-Agreement-and-Foreign-Direct-Investments http://hdl.handle.net/10986/36480 |
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okr-10986-364802021-11-05T05:10:43Z Deep Trade Agreement and Foreign Direct Investments Laget, Edith Roch, Nadia Varela, Gonzalo TRADE AGREEMENTS FOREIGN DIRECT INVESTMENT DEEP INTEGRATION REGIONALISM PREFERENTIAL TRADE AGREEMENTS REGIONAL TRADE INTEGRATION REGIONAL TRADE AGREEMENT Preferential trade agreements are growing in number and deepening in content by incorporating disciplines that go beyond market access. They increasingly encompass non-trade-related disciplines as diverse as intellectual property rights, environment laws, or labor market regulations. Moreover, because investment is complementary to trade, preferential trade agreements provide relevant institutional frameworks to partner countries that wish to regulate their foreign investments. This paper studies the impact of deep trade agreements on foreign direct investment and examines three sub-questions. First, is the impact of trade agreements on foreign direct investment heterogeneous across types of business activity Second, is this impact heterogeneous across disciplines covered in the agreements Third, does the level of development of home and host countries matter for this impact The analysis exploits the World Bank’s data set on the content of preferential trade agreement and data on announcements of bilateral greenfield investment at the activity level. The findings show that deep trade agreements matter for investment: every additional discipline in a preferential trade agreement increases foreign direct investment by 1.4 percent, on average. Deep agreements do not impact foreign direct investment in natural resources and extractive activities and have heterogeneous effects across manufacturing- and services-related activities. The results also reveal that disciplines that go beyond the mandate the World Trade Organization matter more for foreign direct investment. Disciplines related to investment liberalization and protection, intellectual property rights, or migration increase foreign direct investment, whereas disciplines on labor market regulations reduce investment. The results are mostly driven by investment between developed and developing countries. 2021-11-04T16:32:52Z 2021-11-04T16:32:52Z 2021-11 Working Paper http://documents.worldbank.org/curated/undefined/750331635791488049/Deep-Trade-Agreement-and-Foreign-Direct-Investments http://hdl.handle.net/10986/36480 English Policy Research Working Paper;No. 9829 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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English |
| topic |
TRADE AGREEMENTS FOREIGN DIRECT INVESTMENT DEEP INTEGRATION REGIONALISM PREFERENTIAL TRADE AGREEMENTS REGIONAL TRADE INTEGRATION REGIONAL TRADE AGREEMENT |
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TRADE AGREEMENTS FOREIGN DIRECT INVESTMENT DEEP INTEGRATION REGIONALISM PREFERENTIAL TRADE AGREEMENTS REGIONAL TRADE INTEGRATION REGIONAL TRADE AGREEMENT Laget, Edith Roch, Nadia Varela, Gonzalo Deep Trade Agreement and Foreign Direct Investments |
| relation |
Policy Research Working Paper;No. 9829 |
| description |
Preferential trade agreements are
growing in number and deepening in content by incorporating
disciplines that go beyond market access. They increasingly
encompass non-trade-related disciplines as diverse as
intellectual property rights, environment laws, or labor
market regulations. Moreover, because investment is
complementary to trade, preferential trade agreements
provide relevant institutional frameworks to partner
countries that wish to regulate their foreign investments.
This paper studies the impact of deep trade agreements on
foreign direct investment and examines three sub-questions.
First, is the impact of trade agreements on foreign direct
investment heterogeneous across types of business activity
Second, is this impact heterogeneous across disciplines
covered in the agreements Third, does the level of
development of home and host countries matter for this
impact The analysis exploits the World Bank’s data set on
the content of preferential trade agreement and data on
announcements of bilateral greenfield investment at the
activity level. The findings show that deep trade agreements
matter for investment: every additional discipline in a
preferential trade agreement increases foreign direct
investment by 1.4 percent, on average. Deep agreements do
not impact foreign direct investment in natural resources
and extractive activities and have heterogeneous effects
across manufacturing- and services-related activities. The
results also reveal that disciplines that go beyond the
mandate the World Trade Organization matter more for foreign
direct investment. Disciplines related to investment
liberalization and protection, intellectual property rights,
or migration increase foreign direct investment, whereas
disciplines on labor market regulations reduce investment.
The results are mostly driven by investment between
developed and developing countries. |
| format |
Working Paper |
| author |
Laget, Edith Roch, Nadia Varela, Gonzalo |
| author_facet |
Laget, Edith Roch, Nadia Varela, Gonzalo |
| author_sort |
Laget, Edith |
| title |
Deep Trade Agreement and Foreign Direct Investments |
| title_short |
Deep Trade Agreement and Foreign Direct Investments |
| title_full |
Deep Trade Agreement and Foreign Direct Investments |
| title_fullStr |
Deep Trade Agreement and Foreign Direct Investments |
| title_full_unstemmed |
Deep Trade Agreement and Foreign Direct Investments |
| title_sort |
deep trade agreement and foreign direct investments |
| publisher |
World Bank, Washington, DC |
| publishDate |
2021 |
| url |
http://documents.worldbank.org/curated/undefined/750331635791488049/Deep-Trade-Agreement-and-Foreign-Direct-Investments http://hdl.handle.net/10986/36480 |
| _version_ |
1764485336115707904 |