SSRN | 6 June 2016

The political motivations of the United States’ bilateral investment treaty program

by Adam S. Chilton, University of Chicago - Law School

Abstract

The Untied States has signed 47 Bilateral Investment Treaties (BITs) over the last three decades.

The standard explanation for why the United States’ government signed those BITs is that it was motivated by a desire to promote the development of international investment law and to protect American capital invested abroad. An alternative explanation, however, is that the United States has largely used BITs as a foreign policy tool to improve relationships with strategically important countries in the developing world. This project uses qualitative and quantitative evidence to assess whether the United States was motivated to sign BITs based on investment considerations or political considerations. The qualitative evidence suggests that U.S. executive branch officials viewed BITs as a potential way to cement and strengthen relationships with politically important countries. The quantitative evidence suggests that proxies for investment considerations — like trade and FDI flows — are weak predictors of U.S. BIT formation, but that political considerations — like military aid and whether a country was formerly a communist state — are consistently statistically significant predictors. Taken together, the evidence supports the argument that political considerations are better predictors of the BITs the United States signed than investment considerations.
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