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The Effects of preferential trade agreements on foreign direct investment: Evidence from the African Caribbean Pacific region

Gounder, Aruna and Falvey, Rodney and Rajaguru, Gulasekaran (2019) The Effects of preferential trade agreements on foreign direct investment: Evidence from the African Caribbean Pacific region. Open Economies Review, 30 (4). pp. 695-717. ISSN 0923-7992

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Abstract

In this paper we add to a relatively small literature on FDI in the ACP group by focusing on the role of PTAs in attracting FDI. Our empirical analysis utilises panel data on bilateral FDI stocks from 34 OECD countries into 45 ACP countries over the period 2000-2012. This bilateral specification allows us to control for country pair policy variables such as the presence of a PTA, a double tax treaty or a bilateral investment treaty between the OECD source and ACP host country, along with other important explanatory variables identified in the literature. We conclude the prevalence of market seeking FDI in the ACP group, with an important role for regional integration in providing access to surrounding market potential. Aggregation of countries in our sample masks regional differences. We find that in the Caribbean a PTA, with or without investment provisions, has no significant effect on FDI, regardless of whether a BIT is in place. In Africa, however, we find that a bilateral PTA with investment provisions, with or without a BIT, reduces FDI; and a bilateral PTA without investment provisions does the same, unless a bilateral BIT is in place, in which case FDI increases. This reinforces a view that the investment provisions in a BIT and a PTA are somehow aimed at different types of investments.

Item Type: Journal Article
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
Divisions: Faculty of Business and Economics (FBE) > School of Economics
Depositing User: Aruna Gounder
Date Deposited: 05 Aug 2020 15:45
Last Modified: 05 Aug 2020 15:45
URI: http://repository.usp.ac.fj/id/eprint/12271
UNSPECIFIED

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