Skip to main content
×
×
Home

Investor Rights versus Human Rights: Do Bilateral Investment Treaties Tilt the Scale?

  • Cristina Bodea and Fangjin Ye
Abstract

This article argues that the broad and legally enforceable protection that bilateral investment treaties (BITs) offer to foreign investors worsens the human rights practices of developing countries. BITs lock in initial conditions attractive to investors that are linked to vertical investment flows and investment and trade competition. They also constrain the provision of welfare benefits or basic infrastructure. The lock-in and constraining effects are sources of popular grievance and dissent in states that host foreign investment. BIT-protected investor rights, however, limit the ability of governments to back-down vis-à-vis investors, lowering the relative cost of human rights violations. Finally, this study suggests that democratic regimes mitigate the negative effect of BITs. Evidence from 113 developing countries from 1981 to 2009 supports the hypotheses.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Investor Rights versus Human Rights: Do Bilateral Investment Treaties Tilt the Scale?
      Available formats
      ×
      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      Investor Rights versus Human Rights: Do Bilateral Investment Treaties Tilt the Scale?
      Available formats
      ×
      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      Investor Rights versus Human Rights: Do Bilateral Investment Treaties Tilt the Scale?
      Available formats
      ×
Copyright
Footnotes
Hide All
*

Department of Political Science, Michigan State University (email: bodeaana@msu.edu); School of Public Economics and Administration, Institute of Political Science, Shanghai University of Finance and Economics (email: ye.fangjin@sufe.edu.cn). Earlier versions of this article were presented at the annual meetings of the Midwest Political Science Association 2015, International Studies Association 2016, and Political Economy of International Organization 2016 and the University of Houston Political Science Department Seminar. We thank Tanya Bagashka, Glen Biglaiser, Jia Chen, Raymond Hicks, Yoram Haftel, Benjamin Appel, Eric Chang, Michael Colaresi, Pablo Pinto, Peter Rosendorff, Min Tang, Rachel Wellhausen and Boliang Zhu for comments. Five anonymous reviewers and the BJPS editor also provided excellent suggestions. Authors are listed alphabetically. Ye acknowledges support from a Michigan State University Dissertation Completion Fellowship, the National Natural Science Foundation of China (No. 71774106) and IRTSHUFE (No. 2014110344). Data replication sets are available at https://dx.doi.org/10.7910/DVN/AVIA6Z and online appendices at: https://dx.doi.org/10.1017/S0007123418000042.

Footnotes
References
Hide All
Abouharb, Rodwan, and Cingranelli, David. 2006. The Human Rights Effects of World Bank Structural Adjustment, 1981–2000. International Studies Quarterly 50 (2):233262.
Abouharb, Rodwan, and Cingranelli, David. 2007. Human Rights and Structural Adjustment. Cambridge: Cambridge University Press.
Abouharb, Rodwan, and Cingranelli, David. 2009. IMF Programs and Human Rights, 1981–2003. Review of International Organizations 4 (1):4772.
Alfaro, Laura. 2003. Foreign Direct Investment and Growth, Working Paper. Cambridge, MA: Harvard Business School.
Alfaro, Laura, Chanda, Areendam, Kalemli-Ozcan, Sebnem, and Sayek, Selin. 2004. FDI and Economic Growth. Journal of International Economics 64 (1):89112.
Allee, Todd, and Peinhardt, Clint. 2010. Delegating Differences. International Studies Quarterly 54 (1):126.
Allee, Todd, and Peinhardt, Clint. 2011. Contingent Credibility. International Organization 65 (3):401432.
Allee, Todd, and Peinhardt, Clint. 2014. Evaluating Three Explanations for the Design of Bilateral Investment Treaties. World Politics 66 (1):4787.
Amnesty International Report. 2006. Human Rights, Trade and Investment Matters. London: Amnesty International.
Apodaca, Clair. 2001. Global Economic Patterns and Personal Integrity Rights After the Cold War. International Studies Quarterly 45 (4):587–602.
Baron, Reuben, and Kenny, David. 1986. The Moderator-Mediator Variable Distinction in Social Psychological Research: Conceptual, Strategic and Statistical Considerations. Journal of Personality and Social Psychology 51 (6):11731182.
Beck, Nathaniel, and Katz, Jonathan. 1995. What To Do (and Not To Do) With Time-Series–Cross-Section Data. American Political Science Review 89 (3):634647.
Bergstrand, Jeffrey, and Egger, Peter. 2013. What Determines BITs? Journal of International Economics 90 (1):107122.
Bettauer, Ronald. 2009. India and International Arbitration: The Dabhol Experience. The George Washington International Law Review 41:381387.
Bhattacharya, Amar, Montiel, Peter, and Sharma, Sunil. 1997. How Can Sub-Saharan Africa Attract More Private Capital Inflows? Finance & Development 34:36.
Blake, Daniel. 2013. Thinking Ahead. International Organization 67 (4):797827.
Blonigen, Bruce, and Wang, Grace. 2005. Inappropriate Pooling of Wealthy and Poor Countries in Empirical FDI Studies. In Does Foreign Investment Promote Development? edited by Theodore Moran, Edward Graham and Magnus Blomstrom, 221244. Washington, DC: Institute for International Economics.
Bodea, Cristina, and Higashijima, Masaaki. 2017. Central Bank Independence and Fiscal Policy: Can the Central Bank Restrain Deficit Spending? British Journal of Political Science 47 (1):4770.
Brambor, Thomas, Clark, William, and Golder, Matt. 2006. Understanding Interaction Models. Political Analysis 14 (1):6382.
Brooks, Sarah. 2002. Social Protection and Economic Integration: The Politics of Pension Reform in an Era of Capital Mobility. Comparative Political Studies 35 (5):491525.
Büthe, Tim, and Milner, Helen. 2008. The Politics of Foreign Direct Investment into Developing Countries. American Journal of Political Science 52 (4):741762.
Büthe, Tim, and Milner, Helen. 2009. Bilateral Investment Treaties and Foreign Direct Investment. In The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows, edited by Karl Sauvant and Lisa Sachs, 171224. New York: Oxford University Press.
Büthe, Tim, and Milner, Helen. 2014. Foreign Direct Investment and Institutional Diversity in Trade Agreements. World Politics 66 (1):88122.
Cao, Xun. 2010. Networks as Channels of Policy Diffusion: Explaining Worldwide Changes in Capital Taxation, 1998–2006. International Studies Quarterly 54 (3):823854.
Cao, Xun. 2012. Global Networks and Domestic Policy Convergence: A Network Explanation of Policy Changes. World Politics 64 (3):375425.
Cao, Xun, and Prakash, Aseem. 2010. Trade Competition and Domestic Pollution. International Organization 64 (3):481503.
Cao, Xun, and Prakash, Aseem. 2012. Trade Competition and Environmental Regulations. Journal of Politics 74 (1):6682.
Cao, Xun, Greenhill, Brian, and Prakash, Aseem. 2013. Where is the Tipping Point? Bilateral Trade and the Diffusion of Human Rights. British Journal of Political Science 43 (1):133156.
Cingranelli, David, and Richards, David. 1999. Measuring the Level, Pattern, and Sequence of Government Respect for Physical Integrity Rights. International Studies Quarterly 43 (2):407417.
Cingranelli, David, and Richards, David. 2010. The Cingranelli and Richards (CIRI) Human Rights Data Project. Human Rights Quarterly 32 (2):401424.
Cingranelli, David, and Filippov, Mikhail. 2010. Electoral Rules and Incentives to Protect Human Rights. Journal of Politics 72 (1):243257.
Davenport, Christian. 1995. Multi-Dimensional Threat Perception and State Repression. American Journal of Political Science 39 (3):683713.
Davenport, Christian, and Armstrong II., David 2004. Democracy and the Violation of Human Rights. American Journal of Political Science 48 (3):538554.
Davies, Ronald, and Vadlamannati, Krishna. 2013. A Race to the Bottom in Labor Standards? An Empirical Investigation. Journal of Development Economics 103:114.
Elkins, Zachary, Guzman, Andrew, and Simmons, Beth. 2006. Competing for Capital. International Organization 60 (4):811846.
Freeman, Nathan. 2009. The International Investor Rights Regime: Domestic Sources of Commitment and Compliance. Dissertation, University of Georgia. Athens, GA: United States.
Frieden, Jeffry. 1991. Invested Interests. International Organization 45 (4):425451.
Gallagher, Kevin, and Shrestha, Elen. 2011. Investment Treaty Arbitration and Developing Countries, Global Development and Environment Institute Working Paper No. 11–01. Medford, MA: United States.
Gibney, Mark, Cornett, Linda, Wood, Reed, and Haschke, Peter. 2012. Political Terror Scale 1976-2012. Available from http://www.politicalterrorscale.org/, accessed 28 July 2014.
Gill, Judith, Gearing, Matthew, and Birt, Gemma. 2004. Contractual Claims and Bilateral Investment Treaties. Journal of International Arbitration 21 (5):397412.
Ginsburg, Tom. 2005. International Substitutes for Domestic Institutions. International Review of Law and Economics 25 (1):107123.
Gleditsch, Nils, Strand, Havard, Eriksson, Mikael, Sollenberg, Margareta, and Wallensteen, Peter. 2002. Armed Conflict 1946–2001. Journal of Peace Research 39 (5):615637.
Greenhill, Brian, Mosley, Layna, and Prakash, Aseem. 2009. Trade-Based Diffusion of Labor Rights: A Panel Study, 1986–2002. American Political Science Review 103 (4):19862002.
Hafner-Burton, Emilie. 2005. Trading Human Rights. International Organization 59 (3):593629.
Haftel, Yoram. 2010. Ratification Counts. Review of International Political Economy 17 (2):348377.
Haftel, Yoram, and Thompson, Alexander. 2018. When Do States Renegotiate Investment Agreements? The Impact of Arbitration. The Review of International Organizations 13 (1):124.
Hafter-Burton, Emilie. 2009. Forced to Be Good. Ithaca, NY: Cornell University Press.
Haggard, Stephan, and Maxfield, Sylvia. 1996. The Political Economy of Financial Internationalization in the Developing World. In Internationalization and Domestic Politics, edited by Robert Keohane and Helen Milner, 209242. Cambridge: Cambridge University Press.
Hanson, Gordon, Mataloni, Raymond, and Slaughter, Matthew. 2003. Vertical Production Networks in Multinational Firms. Working Paper No. 9723. Cambridge, MA: National Bureau of Economic Research.
Henisz, Witold. 2002. The Institutional Environment for Infrastructure Investment. Industrial and Corporate Change 11 (2):355–89.
Jacob, Marc. 2010. International Investment Agreements and Human Rights. INEF Research Paper Series on Human Rights, Corporate Responsibility and Sustainable Development 03/2010.
James, Lawrence, and Brett, Jeanne. 1984. Mediators, Moderators and Tests for Mediation. Journal of Applied Psychology 69 (2):307321.
Jandhyala, Srividya, Henisz, Witold, and Mansfield, Edward. 2011. Three Waves of BITs. Journal of Conflict Resolution 55 (6):10471073.
Keith, Linda, and Poe, Steven. 2000. The United States, the IMF, and Human Rights. In The United States and human rights, edited by David Forsythe, 273299. Lincoln, NE: University of Nebraska Press.
Kerner, Andrew. 2009. Why Should I Believe You. International Studies Quarterly 53 (1):73102.
Klemm, Alexander, and Parys, Stefan. 2012. Empirical Evidence on the Effects of Tax Incentives. International Tax and Public Finance 19 (3):393423.
Leo, Benjamin. 2010. Where are the BITs? How U.S. Bilateral Investment Treaties with Africa Can Promote Development. Center For Global Development Essay. Washington, DC: United States.
Li, Quan. 2006. Democracy, Autocracy, and Tax Incentives to Foreign Direct Investors. Journal of Politics 68 (1):6274.
Li, Quan, and Resnick, Adam. 2003. Reversal of Fortunes. International Organization 57 (1):175211.
Li, Quan, and Reuveny, Rafael. 2006. Democracy and Environmental Degradation. International Studies Quarterly 50 (4):935956.
Li, Xiaoying, and Liu, Xiaming. 2005. Foreign Direct Investment and Economic Growth. World Development 33 (3):393407.
Lupu, Yonatan, and Poast, Paul. 2013. Are Bilateral Investment Treaties Really Bilateral? Available from https://ncgg.princeton.edu/new_ipes/2013/papers/F900_rm2.pdf, accessed 19 January 2014.
Meyer, William. 1996. Human Rights and MNCs. Human Rights Quarterly 18 (2):368397.
Milner, Helen. 2014. Introduction – The Global Economy, FDI, and the Regime for Investment. World Politics 66 (1):111.
Moore, Will. 1998. A Repression and Dissent. American Journal of Political Science 45 (3):851873.
Mosley, Layna. 2008. Workers’ Rights in Open Economies. Comparative Political Studies 41 (4–5):674714.
Mosley, Layna. 2011. Replication Data for: Collective Labor Rights Dataset. Available from https://dataverse.harvard.edu/dataset.xhtml?persistentId=hdl:1902.1/15590, accessed 8 July 2014.
Mosley, Layna, and Uno, Saika. 2007. Racing to the Bottom or Climbing to the Top? Economic Globalization and Collective Labor Rights. Comparative Political Studies 40 (8):923948.
Murdie, Amanda, and Davis, David. 2012. Shaming and Blaming: Using Events Data to Assess the Impact of Human Rights INGOs. International Studies Quarterly 56 (1):116.
Neumayer, Eric. 2002. Do Democracies Exhibit Stronger International Environmental Commitment? A Cross-Country Analysis. Journal of Peace Research 39 (2):139164.
Neumayer, Eric. 2006. Self-Interest, Foreign Need, and Good Governance. Foreign Policy Analysis 2 (3):245268.
Neumayer, Eric, Nunnenkamp, Peter, and Roy, Martin. 2016. Are Stricter Investment Rules Contagious? Host Country Competition for Foreign Direct Investment Through International Agreements. Review of World Economics 152 (1):177213.
Neumayer, Eric, and Plümper, Thomas. 2010. Spatial Effects in Dyadic Data. International Organization 64 (1):145166.
Nikiema, Suzy. 2012. Best Practices – Indirect Expropriation, International Institute for Sustainable Development Working Paper. Manitoba: Canada.
Nordas, Ragnhild, and Davenport, Christian. 2013. Fight the Youth. American Journal of Political Science 57 (4):926940.
Olney, William. 2013. A Race to the Bottom? Employment Protection and Foreign Direct Investment. Journal of International Economics 91 (2):191203.
Peterson, Luke. 2009. Human Rights and Bilateral Investment Treaties, Right and Democracy Working Paper. Quebec: Canada.
Peterson, Luke, and Gray, Kevin. 2003. International Human Rights in Bilateral Investment Treaties and in Investment Treaty Arbitration, International Institute for Sustainable Development Working Paper. Manitoba: Canada.
Poulsen, Lauge. 2015. Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries. Cambridge: Cambridge University Press.
Poulsen, Lauge, and Aisbett, Emma. 2013. When the Claim Hits. World Politics 65 (2):273313.
Richards, David, Gelleny, Ronald, and Sacko, David. 2001. Money with a Mean Streak? Foreign Economic Penetration and Government Respect for Human Rights in Developing Countries. International Studies Quarterly 45 (2):219239.
Rosendorff, Peter, and Shin, Kong Joo. 2015. Regime Type and International Commercial Agreements. International Journal of Economic Theory 11 (1):107119.
Ruane, Frances, and Ugur, Ali. 2006. Export Platform FDI and Dualistic Development. Transnational Corporations 15 (1):75113.
Rudra, Nita. 2002. Globalization and the Decline of the Welfare State in Less Developed Countries. International Organization 56 (2):411445.
Rudra, Nita. 2011. Openness and the Politics of Potable Water. Comparative Political Studies 44 (6):771803.
Simmons, Beth. 2014. Bargaining Over BITs, Arbitrating Awards. World Politics 66 (1):1246.
Sorens, Jason, and Ruger, William. 2012. Does Foreign Investment Really Reduce Repression? International Studies Quarterly 56 (2):427436.
Spilker, Gabriele, and Bohmelt, Tobias. 2013. The Impact of Preferential Trade Agreements on Governmental Repression Revisited. Review of International Organizations 8 (3):343361.
Staiger, Douglas, and Stock, James. 1997. Instrumental Variables Regression with Weak Instruments. Econometrica 65 (3):557586.
Swenson, Deborah. 2009. Why Do Countries Sign BITs? In The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows, edited by Karl P. Sauvant and Lisa E. Sachs, 437457. New York: Oxford University Press.
Tobin, Jennifer, and Busch, Marc. 2010. A BIT is Better Than a Lot. World Politics 62 (1):142.
UNCTAD. 2004. World Investment Report. New York and Geneva: United Nations.
UNCTAD. 2012a. Investment Policy Framework for Sustainable Development. Geneva: United Nations.
UNCTAD. 2012b. Fair and Equitable Treatment. Geneva: United Nations.
UNCTAD. 2015. World Investment Report. New York and Geneva: United Nations.
Vadlamannati, Krishna. 2008. Economic Interest Versus Social Conscience Signing Bilateral Investment Treaties – Does Human Rights Matter. Munich: MPRA Paper No. 15431.
Van Harten, Gus. 2012. Arbitrator Behavior in Asymmetrical Adjudication. Osgoode Hall Law Journal 50 (1):211268.
Van Os, Roos, and Knottnerus, Roeline. 2011. Dutch Bilateral Investment Treaties: A Gateway to ‘Treaty Shopping’ for Investment Protection by Multinational Companies. Amsterdam: SOMO.
Wellhausen, Rachel. 2015a. Investor-State Disputes: When Can Governments Break Contracts? Journal of Conflict Resolution 59 (2):239261.
Wellhausen, Rachel. 2015b. Bondholders vs. Direct Investors? Competing Responses to Expropriation. International Studies Quarterly 59 (4):750764.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

British Journal of Political Science
  • ISSN: 0007-1234
  • EISSN: 1469-2112
  • URL: /core/journals/british-journal-of-political-science
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

Type Description Title
UNKNOWN
Supplementary materials

Bodea and Ye Dataset
Dataset

 Unknown
PDF
Supplementary materials

Bodea and Ye supplementary material 1
Appendix

 PDF (281 KB)
281 KB

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed