Marchant, M. A., Cornell, D. N., &Koo, W. (2002). International trade and foreign direct investment: replacement or complement? Journal of Agriculture and Applied Economics, 34(2), 289-302. In this study, we theorize that preferential agreements (ASAs) send two different signals to foreign direct investors. At the first level, an PTA indicates that Member States will maintain stable and peaceful relations with one another, making open hostility of the host State towards investors established in the Member States unlikely. At the second level, a PTA can signal that investments are protected from more subtle interference that violates property rights. While each PTA sends the first-headed signal, only deep PTAs provide provisions such as investor-state dispute settlement mechanisms and the protection of the property rights of that signal on the other hand. The signal of the second stage is particularly important for investors in countries with weak property rights, as the additional safeguards offered by a deep agreement can replace those that are lacking at the national level. We find empirical support for our argument: the depth of the PTA is positively linked to foreign direct investment between Member States, but the association is weakening because property rights are gaining strength in host countries. These results indicate that comprehensive trade agreements, unlike shallow PTAs, allow governments to attract a higher level of foreign direct investment if domestic policies are not sufficient. However, flat agreements are sufficient where domestic policy already protects property rights.
This manual carefully documents this radical change: the evolution of SAAs into “deep” trade agreements. The plethora of new data detailing the content of ASAs will be critical for researchers and practitioners in trade and beyond. It will help us address difficult questions about the conception and effects of deep integration and disintegration and about the future of international economic governance, at a time when these issues are at the forefront of the political debate. This changing content raises a number of new questions for policymakers and researchers. What are the drivers of “deep” trade agreements and what are their effects? How can in-depth trade agreements be designed to promote the well-being of all members and minimize discrimination against non-members? How can we cooperate with different integration approaches and use preferential agreements as laboratories for reforming the multilateral trading system? Gopinath, M., Pick, D., &Vasavada, U. 1999. The economics of foreign direct investment and trade with application in the United States. . . .