Failure to Deliver: The Investment Effects of US Preferential Economic Agreements


  • An earlier version of this paper was presented at the American Society for International Law’s International Economic Law Interest Group Meeting in Washington, DC, in November 2008 and the Annual Meeting of the American Political Science Association, 30 August–2 September 2007, in Chicago, Illinois. We thank panel participants at both conferences for their helpful comments.


Global trade and investment rules are increasingly determined by bilateral and regional agreements, which are widely expected to increase economic ties between the signatories. Even though the United States is a relative newcomer to these narrower economic agreements, it has signed several different types with dozens of partner countries. These agreements, which often require partners to make costly policy changes, are nonetheless attractive because they provide preferential access to the US market and promise increased inward investment. In this paper, we compare the investment effects of three different types of agreements and find little evidence that existing international agreements (trade and investment framework agreements, bilateral investment treaties or preferential trade agreements) tend to increase investment from the United States. After exploring other potential explanations, we conclude that US treaty partners may have unrealistic expectations for agreements to increase direct investment.