Coase-Sandor Working Paper Series in Law and Economics
Publication Date
2024
Abstract
The web of over 3,000 Bilateral Investment Treaties (“BITs”) is the primary body of international law regulating cross-border investments. Research suggests that these treaties may have had a limited impact on promoting new investments, but that they still may have helped to improve countries’ political relationships. In this paper, we document that this pattern was reversed for one of the most prolific signers of BITs: China. Using a stacked-event research design, we find that Chinese BITs are associated with an increase in Bilateral Foreign Direct Investment Flows but a divergence in voting patterns at the United Nations. We then explore two explanations for why the Chinese BIT program led to increased investment while also producing foreign policy divergence: that the domestic political costs of economic engagement with China push countries away, and that there are offsetting international pressures that have stronger pulls than China’s efforts. We find no support for the domestic political costs explanation, but we do find evidence that the countries that received increased aid from the United States after signing a Chinese BIT had greater foreign policy divergence with China.
Number
1042
Recommended Citation
Chilton, Adam and Rao, Weijia, "The Limits of Diplomacy by Treaty: Evidence from China’s Bilateral Investment Treaty Program" (2024). Coase-Sandor Working Paper Series in Law and Economics. 1042.
https://chicagounbound.uchicago.edu/law_and_economics/1048
