Investment Rules for the Global Economy - Bilateral and Multilateral Strategies to Protect and Liberalize Foreign Direct Investment

Over the past years, the web of international treaties offering legal protection of foreign direct investment has grown at an astonishing pace.
Over 2000 bilateral investment treaties (BITs) have been concluded since 1959. Moreover, regional and bilateral free trade agreements now routinely include chapters on investment. At the same time, efforts to create multilateral rules on FDI have either failed (e.g. the MAI) or been successful in limited domains only (the GATS and TRIMS agreements).

Why the lack of consensus over investment rules? The US opts for bilateral, high-level treaties, but does not offer much support for multilateral agreements. In contrast, the EU and Japan seek basic FDI rules in the current WTO round. Bilateral, high-level instruments are only negotiated as part of free trade agreements.

This presentation presents a first cut at an explanation of the divergent policies. Governments face demands from the business side to protect investor rights and liberalize investment regimes in host countries. The choice over bilateral or multilateral avenues is determined by the negotiating strength of the states and the concentration of problems of investors in certain countries. Current trends in Japanese FDI in particular have brought the need for basic investment rules to the fore, leading to a convergence with the position of the EU.

Mark Manger is a Ph.D. Candidate in the Department of Political Science at the University of British Columbia in Vancouver, Canada. His research focuses on comparative trade policy and trade and investment agreements. Currently, he holds a dissertation fellowship from the German Institute for Japanese Studies and is a visiting researcher at the Institute of Social Science at the University of Tokyo.