Negotiating bits with Models: The Power of Expertise Tarald Laudal Berge yvind Stianseny September 4, 2017 Abstract The international investment regime is in ux. As a reaction to the growth of treatybased claims for investment arbitration, awareness around the content of investment treaties has risen. Some states have chosen to exit the regime altogether, some have started re-negotiating their treaties, while many states are still engaged in signing new investment treaties. At the same time a legitimacy debate has arisen in academia. One of the central questions in the debate is: Who are the rule-makers, and who are the rule-takers in the investment regime? Building on ndings from qualitative research and theory of deliberation and arguing, we make the case for how success in investment treaty negotiations is more likely to stem from expertise in states' negotiating bodies than rational choice assumptions around material assets. In our empirical analysis, we use novel text-as-data analysis to leverage states' model investment treaties as ideal type treaty preference measures. When comparing the textual distance between a large sample of model treaties and treaties concluded on the basis of models, we nd that states with governance systems that increase negotiation expertise are the most successful in investment treaty negotiations. Our theoretical approach should be of interest to other scholars, and our empirical ndings have signi cant implications for how policy-makers should think about power in economic diplomacy. y Dept. of Political Science and PluriCourts, University of Oslo. E-mail: t.l.berge@stv.uio.no. Dept. of Political Science and PluriCourts, University of Oslo. E-mail: oyvind.stiansen@stv.uio.no. 1 1 Introduction Based on bilateral investment treaties (bits) and preferential trade agreements (ptas), investors have now led close to 900 known claims for reparation under investment treaty arbitration (ita).1 Most of the claims have been brought the last 15 years, and the claims have spurred allegations of non-egalitarian power structures in the underlying treaties. As some states have started a full edged retreat from the regime altogether, and others have initiated extensive e orts to re-negotiating their existing investment treaties (Berge and Hveem 2017), a vociferous academic debate around the legitimacy of the regime has come about (see e.g. Ma 2012, Waibel et al. 2010).2 One of the core questions of this legitimacy debate is who the rule-makers and the rule-takers are in the investment regime. Some argue that developing countries are pressured to agree with inappropriate laws under bits (Gwynn 2016), while others note that the dynamism and decentralisation of the current investment regime makes it possible for all governments to negotiate, update and/or modify their agreements (Pauwelyn 2014). In this paper we therefore ask: What can states do to a ect the content of investment treaties they sign? What determines success in investment treaty negotiations? An age-old puzzle in international negotiations is the structuralists' paradox (Zartman and Rubin 2002: 3). How is it that presumptively weaker states can gain concessions when negotiating with more powerful states? Expecting to lose, one would assume that weaker states would avoid negotiations with powerful states at all costs, and strong parties would have little need to negotiate with weak parties when they can e ectively take what they want with force. Yet, weak states not only engage in international negotiations with stronger states, they often emerge with sizeable gains. This is very much the case in investment treaty negotiations, but the current body of empirical studies still lean heavily on rationalist accounts of strategic competition and coercive bargaining as drivers of negotiating success (Elkins, Guzman and Simmons 2006, Allee and Peinhardt 2010). In the same way that rationalist approaches to power-based bargaining has been common in analyses of more formal international organizations,3 recent studies of power asymmetry in economic As of August 2017, The PluriCourts Investment Treaty and Arbitration Database (PITAD)(Behn, Berge and Langford 2017) had 879 treaty-based investor-state arbitrations registered, and the unctad investment policy hub had 817 cases. See: http://investmentpolicyhub.unctad.org 2 The rise of ita has also spawned a vast literature on the evolution of investment treaty law. See e.g. Alvarez and Sauvant (2011), Brown and Miles (2011), Echandi and Sauve (2013). 3 See e.g. Drezner (2008) on international regulatory regimes in general, Gruber (2000) on supranational institutions governing money and trade, and Copelovitch (2010) on the lending practice of the imf. 1 2 diplomacy nd that states' ability to include strong enforcements provisions in bits depend on economic power (Allee and Peinhardt 2014), that developing states are more likely to tie their hands under unfavourable bits than developed states (Simmons 2014) and that states' military power a ects negotiation success (Allee and Lugg 2016). The qualitative research of Poulsen (2014; 2015), however, concludes that rather than power asymmetries, what is driving success in bit negotiations is knowledge asymmetries. Negotiating capacity is driven by states' experience and expertise in investment treaty making. This focus on knowledge can be reconciled with ndings concerning the nature of deliberation in other areas of international negotiation where the importance of negotiating context is highlighted (Risse 2000; 2004). In this paper we therefore propose a power-asexpertise approach to the study of success in bit negotiations. We use insights from the theory of deliberation and arguing, in conjunction with more traditional negotiation theory and decision analytic techniques (Schelling 1960, Zartman and Rubin 2002), to inform an understanding of success in bit negotiations as stemming from negotiation expertise. In addition to the theoretical innovation, our analysis makes a distinct methodological advance on previous scholarship. Instead of making treaty preference assumptions based on a capital-exporter vs. capital-importer dichotomy, we utilize public bargaining drafts called model bits to measure states' ideal type preferences. To generate measures of negotiating success, we compute the verbatim distance between model bits and concluded bits with novel text-as-data methods (Spirling 2012, Alschner and Skougarevskiy 2016a). Our ndings indicate that there is a robust, positive relationship between negotiation expertise asymmetries and success in bit-making. Interestingly, we also nd that the e ect of di erences in material assets such as home markets and domestic investment traction is less associated with bit outcomes than previously thought. The article is structured as follows. First, we brie y elaborate on the conventional understanding of what drives success in investment treaty arbitration. Next, we develop our theory of negotiating power as expertise, and discuss the mechanisms through which expertise drives success. Crucially, we argue that certain institutional capacity characteristics are likely to generate an environment in which negotiating expertise is likely to ourish. Third, we expand on our measure of success in bit negotiations, and present our data and estimation methods. Fourth, we present our analysis and a broad range of robustness checks. We conclude by contextualizing our ndings and discussing what implications they should have for countries that are engaged in investment treaty negotiations or renegotiations. 3 2 The conventional rationalist account The bit narrative has changed over the years, and researchers have moved away from studying the e ects of bits on foreign direct investment (fdi) { towards studying bit and the dynamics of investment treaty bargaining. The standard rationale for di usion bits usu- ally starts with the fact that multinational investors are subject to hazards when investing abroad. These hazards decrease expected pro t margins through imposing transaction costs on operations (Williamson 1985, North 1990). At the same time, with global competition for capital may lead states to craft business friendly policies to attract investment. This creates a paradox. Before the investment it might be rational to lure investors with concessions such as tax holidays, regulatory exemptions and special production zones (Kobrin 1987). But after the investment it may be rational for states to renege on those concessions, creating what is known as the time inconsistency problem. The greater the sunk costs of the investor, the larger the inconsistency problem becomes (Vernon 1971). The challenge for the investor is to assess whether states' pre-investment commitments are credible. And the worse the domestic institutions to protect property in the capital importing country, the less credible that country's commitment is. Countries trying to attract capital therefore need some mechanism to exhibit ex ante commitment to property rights protection, and bits are often viewed as a credible commitment device t for the purpose. Almost all existing research on why countries sign bits has come to analyse treaty negotiations in light of this rational choice framework, assuming a simple North-South world dichotomy (Elkins, Guzman and Simmons 2006, Allee and Peinhardt 2010; 2014, Simmons 2014). At their core, they make ex ante assumptions on three levels. First, they base their studies on a capital-exporter (developed countries) versus capital-importer (developing countries) dichotomy. Whereas this dichotomy may have been a fair re ection of reality in the early days of the regime when North-South bits were predominant, we believe it is less suited in a world where multinational corporations from developing countries are on the rise (Sauvant 2009), and both South-South bits (Poulsen 2010) and North-North mega-regional economic partnerships4 have become commonplace. Second, the studies derive (static) treaty preferences from this dichotomy. In short, they assume that treaty content can be mapped along a unidimensional protection- exibility See for example the Transatlantic Trade and Investment Partnership (De Ville and Siles-Brugge 2015), the Trans-Paci c Partnership (Alschner and Skougarevskiy 2016b) and the Comprehensive Economic and Trade Agreement between the European Union and Canada (Fafard and Leblond 2013). 4 4 scale, where negotiation success for capital-exporters is when they achieve bits with strong investor protection,5 and success for capital-importers is maintaining reasonable domestic regulatory space.6 The degree to which concluded treaties lean more towards either the protection or the exibility endpoints of this scale depends on the relative degree to which the two parties depend on the treaty being negotiated.7 The implication is that the party most dependent on an agreement should be most willing to make concessions in the negotiations, and each negotiating party's power is thus inversely proportional to the value they place on reaching an agreement as compared to the best alternative policy option.8 Third, the developing states' treaty dependence is usually assumed to stem from their dependence on fdi.9 Developed states' treaty dependence on the other hand is assumed to be shaped by their dependence upon protecting investors abroad { and while fdi is scarce, the supply of developing country host states with which one can sign bits is not. This creates a dynamic where developing countries, based on continuous assessments of costs and bene ts, are presumed to engage in rational competition for fdi through bit signing (Elkins, Guzman and Simmons 2006: 825). Research by Poulsen (2014; 2015) however demonstrate that bit negotiators in the de- veloping world have not made their bit decisions based on cost-bene t analyses or rational competition for capital. Importantly, the rationalist account fails to take into account that in the absence of issue-speci c expertise and experience, generalist bureaucracies rarely diverge from default solutions when negotiating bits (Sunstein 2013). This importance of possessing expertise in complex, international negotiations has been widely acknowledged within negotiation theory (Winham 1977, Zartman 1995). The crux of the argument is that while no negotiator will ever have perfect knowledge of the technical or legal issues at hand, nor the preferences of other parties to an agreement, those with superior expertise should As that would relieve them of the potential costs associated with protecting their investors abroad through diplomatic espousal. 6 As they wish to retain the possibility to adapt industrial regulation and tax policy as their economy evolves through di erent stages of maturity. See Broude, Haftel and Thompson (2017) for a more recent discussion of state regulatory space in the context of the Transatlantic Trade and Investment Partnership. 7 This thinking is based on the notion of asymmetrical interdependence (Keohane and Nye 1977), which, in the context of intergovernmental negotiations, implies that the distribution of bene ts among the negotiating parties re ect their relative negotiating power. Power is shaped by patterns of policy interdependence because getting to an agreement is more important for one negotiating party than the other. 8 This is what is called their preference intensity (Moravcsik 1998: 60-62). Preference intensity in international negotiations is often viewed under the umbrella of issue-speci c power. See for example Tallberg (2008: 692) on bargaining in the European Council. 9 Which in turn is based on an assumption that bits will attract fdi, a causal relationship around which there is little empirical consensus. For a reviews of investor surveys, see: Poulsen (2015: 8). For empirical studies, see: Hallward-Driemeier (2003), Egger and Pfa ermayr (2004), Neumayer and Spess (2005), Salacuse and Sullivan (2005), Kerner (2009), Aisbett (2009). 5 5 be better positioned to shape agreements in their own favour (Young 1991, Tallberg 2006). This analysis is an attempt at testing Poulsen's qualitative ndings in a larger sample of negotiations, while building a broader theory of the power of expertise in bit negotiations. 3 Negotiating expertise as a success factor Our theory of what drives success in bit negotiations departs from theory of deliberation and arguing (Risse 2000; 2004). This theory states that the modes of rule-setting in international negotiations can be organized along a continuum with two endpoints: arguing and bargaining. Bargaining follows the logic of rational choice theory, and is a form of rule-setting where self-interested, utility-maximising actors negotiate agreements based on give-and-take of ex ante xed preferences.10 In this context, previous hierarchies of power carry substantial weight. Arguing, and the closely related concept of persuasion, pertain to a social logic quite di erent from that theorized by rational choice. When arguing, actors instead try to challenge the validity of claims in normative or causal statements through communicative consensus-building. Actors that use arguing instead of bargaining, make themselves open to being persuaded by the better argument, making previously important social and power hierarchies less decisive for the outcome. Importantly, when analysing the dynamics of international negotiations, deliberation theory holds that we should start by identifying the context in which the negotiations take place. In short, all negotiations are embedded in a material and a social context. Features of the material context are typically the material assets of the participants (money and military strength), their cost-bene t calculations, and the various tangible factors that may heighten the credibility of commitments or make side payments possible (Schoppa 1999). The key feature of the social context on the other hand is the institutional setting in which negotiations take place.11 Two points are important in this regard. First, if the context in which negotiations take place is densely institutionalized, with agreed-upon norms, rules and decisions-making procedures to guide the process, a strong `logic of appropriateness' is likely to prevail (March and Olsen 1998: 951-952). This logic restricts negotiators' room 10 This logic of bargaining analogous to the view of political order as stemming from a `logic of expected consequences,' where order arises \from negotiation among rational actors pursuing personal preferences or interests in circumstances where there may be gains to collective action" (March and Olsen 1998: 949). Coordination is, in this view, dependent upon the bargaining position of the actors. 11 The idea that inter-state negotiations in fact take the form of social encounters has been widely recognised within many of the social sciences. See for example Kramer and Messick (1995) for a broad theory of negotiation as a social process. 6 for exibility through determining which arguments and justi cations are seen as socially acceptable. Second, the degree to which negotiations are mediated by an external authority or audience should also a ect the negotiation dynamics. If negotiations take place in front of an audience they are likely to take a ritualistic form where negotiators remain true to their mandate and pre-negotiation positions, whilst negotiators are more likely to exhibit exibility and seek consensus if the negotiations take place behind closed doors. This is because the negotiators face less risk of being called out by relevant stakeholders when exposing their states' interests to arguments and compromise. While both the material and the social context is important, Ulbert and Risse (2005) show that studies of international negotiations have tended to focus overwhelmingly on the material side. This is also true in the eld of bit studies, as discussed above. Most studies focus exclusively on material context factors such as market size, coercive capabilities and the utility-maximising way in which states leverage their material assets. As such, the studies assume bargaining to be the chief strategy sought by states when negotiating bits. However, when we explore the social context of bit negotiations, there are good reasons to believe that arguing plays an important role too. First, negotiations do not usually happen under the auspices of any particular international or intergovernmental organization.12 Quite the contrary, bit negotiations have bit largely taken place on an ad-hoc basis, often in conjuncture with other interstate negotiations. Secondly, until Lauge Poulsen (2014; 2015) started his seminal project on bits the developing world a few years ago, we had very few rst hand accounts of how bit in ne- gotiations transpired, simply because they were all negotiated behind closed doors. What we knew came from unctad: bit negotiations usually entail several rounds of discussions, the exchange of drafts and counter-drafts, and face-to-face negotiations around particularly dicult provisions. Ultimately, bits are negotiated in a setting where there should be ample room for exibility, compromise, argumentation and persuasion. As highlighted by tad, unc- \the key point to be stressed is that each [bit] negotiation is a unique and peculiar process requiring exibility and accommodation" (1998: 28). Following the theory of deliberation and arguing outlined above, one can therefore assume that the degree to which states' negotiators are skilled in normative and causal arguing should have an in uence on their success in bit negotiations. The only exception being the bit signing ceremonies unctad hosted in the late 1990's and early 2000's. However, the organization itself did not participate in, or oversee, the individual negotiations { they only facilitated them (Poulsen 2015: 91-99). 12 7 Before we expand on our theory, it should be noted that pure arguing and pure bargaining represent opposite ends of a continuum, and that the communicative processes adopted in most international negotiations are hybrids forms that reside somewhere along this continuum. In other words, the importance we place on social context should not be confused with the claim that arguing always is of most importance to nal outcomes. Instead, material assets and negotiating expertise seem to be important at di erent stages of a treaty negotiating processes. Empirical research does for example seem to suggest that negotiating expertise is particularly relevant during the agenda-setting and pre-negotiation phases, where the initial frame for the negotiations are set. Arguing also seem to be of particular importance when negotiations break down or reach stalemates, because arguing may allow actors to re-re ect about their stance and interests (Risse 2004: 302-303). Material assets on the other hand, seem to be of special importance during the prenegotiation phase. A case study of the 1987 negotiations on the United States-Canada fta,13 illustrates this dynamic very well (Winham and DeBoer-Ashworth 2002). Canada entered the negotiations with an interest in establishing a rule-based (rather than powerbased) relationship with the United States. They viewed a strong dispute settlement mechanism in the treaty as a way to achieve this. And surprisingly to commentators at the time they achieved just that, in spite of their material inferiority. In Chapter 19 of the treaty the parties agreed to replace judicial review by national courts in cases of anti-dumping and countervailing with bi-national panel reviews. In their analysis of the negotiations, Winham and DeBoer-Ashworth note that the United States appeared to leverage its superior material resources to encourage Canada to participate in the negotiations. But once the negotiations actually began \a threshold was crossed in which a perceived asymmetric economic-power relationship did not automatically translate into an asymmetric negotiating-power relationship" (2002: 48). 3.1 Decision analytics and expertise An adapted version of Schelling's (1960: 47-51) binary choice diagram can be used to illustrate the mechanism through which parties' negotiating expertise a ects outcomes in bit negotiations.14 In this scheme, one party exercises negotiating power vis-a-vis its counterpart when its actions negatively or positively alter their (perceived) valuation of a particular 13 14 The 1987 US-Canada fta was the North American Free Trade Agreement (nafta) forerunner. Adapted by Zartman and Rubin (2002: 11-12). 8 CountryA 's output value r r 0 0 s s CountryB 's output value Figure 1: From pre-negotiation to post-negotiation perceptions of value outcome; for example the wording of a bit provision. While rational materialists such as Schelling viewed credible threats and side payments as the most important bargaining tactics, deliberation theory assumes that the ability to make causal and normative arguments { what we label negotiating expertise { is the chief mechanism through which bit negotiators obtain gains in international negotiations (Risse 2004: 297). So for the purpose of our study, consider the following example: Country and Country A are negotiating a bit B (see Figure 1). After they have swapped opening drafts or pre- negotiation policy preferences, they establish a draft document with contentious provisions and formulations in brackets. One of these is the transfer of funds provision.15 Because Country is worried about depletion of its foreign currency reserves, it wishes to maintain A the right to impose some level of exchange controls on foreign investors. Country however B is more worried about its outgoing investors' right to transfer investments and returns into freely convertible currencies. Let Country 's pre-negotiation transfer of funds preference A be connoted by r and Country 's preference connoted by s. The two countries' perceived B output valuations of preferences r and s are mapped along the y- and x-axes. As negotiations on how to solve the con icting considerations evolve, both negotiators try to argue in favour of their speci c perception of the ideal transfer of funds provision. In e ect, they try to convince their counterpart that his or her pre-negotiation valuation is wrong. Country 's negotiator may for example manage to reassure Country 's negotiator B A Most bits include a provision guaranteeing free transferability of investment-related payments (Vandevelde 2010: 316-324). This is however a notoriously dicult provision to negotiate (Vandevelde 1998: 632). For example, the negotiators in the 2004 us-Chile fta spent nearly two years negotiating back and forth before they found a version both parties could accept (Ffrench-Davis et al. 2015: 335-336). 15 9 that concerns over foreign currency depletion are overwrought, while also making the case for why free transfer of funds will be conducive to inward investment in the future. If, through this interaction, Country 's negotiator negatively alter Country 's perceived valuation of exchange controls (from r to r0 ), at the same time as positively altering Country 's perceived valuation of free transfer of funds (from s to s0 ), the parties should agree on a transfer of funds B A A provision that is more in line with Country 's pre-negotiation preferences than Country 's. B A As such, Country has used its superior negotiating expertise vis-a-vis Country to achieve B A a more favourable outcome for itself. 3.2 Institutional capacity and negotiating expertise In the absence of data on states' actual treaty negotiators (which would be our direct dependent variable), we propose an indirect approach to thinking about negotiating expertise. Our general claim is that higher levels of institutional capacity should produce an environment more conducive to generating expertise in the civil service. Institutional capacity is de ned as the potential capabilities of bureaucratic institutions to make and implement policy, independent of partisan and ideological policy preferences (Krause and Woods 2014: 370). As such, it is analogous to Teorell and Rothstein's (2008) approach to quality of government as driven by impartiality. They focus on how the implementation of policies by civil servants should happen without having to take into consideration interest that are not beforehand stipulated in the policy or the law. In line with this thinking, our speci c claim is that where bureaucrats are insulated from executive or private interest capture, institutional systems that are conducive to the generation and maintenance of expertise are more likely to emerge. And when negotiators are selected from an expert bureaucracy, they should be better at making causal and normative arguments. Thus, because states usually select their negotiators from the civil service, we believe that bureaucratic capacity is the factor most important for fostering negotiating expertise. However, we believe that public sector corruption, a particularly harmful trait of bureaucracies, should be considered as well. We discuss these two factors in turn. Bureaucratic capacity The reasons for why we believe that impartial bureaucracies are better at generating and maintaining expertise than impartial ones is grounded in the `Weberian state hypothesis' 10 (Evans 1995). The key institutional characteristics of a `Weberian' bureaucracy include meritocratic recruitment; civil service procedures for hiring and ring; and lling of higher levels of the hierarchy through internal promotion. While merits-based hiring16 and civil service procedures for hiring and ring, are processes that in and of themselves makes entry and exit in the bureaucracy a question of expertise, the fact that civil servants enter the bureaucracy based on their merit also make it more likely that e ective performance and skill-enhancement becomes valued attributes among colleagues (Rauch and Evans 2000: 5052). Indeed, multiple studies have found meritocratic stang of bureaucracies to increase competence (Krause, Lewis and Douglas 2006, Lewis 2007; 2010, Gallo and Lewis 2011). In turn, the long-term career rewards that a system of internal promotion generates should improve intra-bureaucracy communication and information-sharing, and reinforce civil servants' commitment to the job. In the absence of formal merits, civil servants main nevertheless develop expertise through experience and feedback (Neale and Bazerman 1991: 86-87). As such, structures that ensure stability should also be an aspect on bureaucratic capacity is assessed.17 ikewise, low levels of turnover should enhance the institutional memory-role played by the bureaucracy.18 Public sector corruption There are a couple of reasons for why we believe levels of public sector corruption is also connected to expertise in states' bureaucracies, but the basic idea is that corruption run directly counter to the fundamental ideas of meritocracy. Public sector corruption involves using ones public position to achieve private gain, and is a violation of impartiality through discriminatory exercise of power (Kurer 2005: 230). In the `tollboth' theory of corruption, Shleifer and Vishny (1993) suggest that in states that are plagued by corruption, the red tape regulation that corrupt civil servants and politicians set up to extract bribes lead to very inecient governance procedures.19 This very ineciency may stop the best people from being hired, and keep incompetent personnel in the administration. Moreover, a key manifestation of public corruption is the creation of patronage classes, which in turn politicises and a ects hiring procedures in the civil service system. This feat has for example been That is, conditioning hiring on a civil service exam or university degree. See e.g. Weyland's (2006) study of policy reform in Latin America, quoted in Poulsen (2015: 29). The same argument is made in the context of trade negotiations (Busch, Reinhardt and Sha er 2009). 18 This institutional memory-argument has also been made in the context of legislative turnover (Krause and Woods 2014: 372). 19 Their theory is empirically corroborated by Djankov et al. (2002). 16 17 11 found to hinder the development of bureaucratic expertise and competent administration in countries like Spain, Italy, Greece and Portugal (Sotiropoulos 2004). Before we go on to discuss our data and empirical analysis, it should be noted that the e ect of institutional capacity on success in bit negotiations may also function through the more conventional credible commitments mechanism. Bureaucracies, to the degree that they are impartial, function as shock absorbers that minimize the (immediate) e ect of sudden changes of opinion in the executive oce. Thus, an impartial bureaucracy probably provides a more ecient and stable negotiating climate for bit negotiators than politicised bureaucracies. This is important because we know that bit negotiations can be lengthy procedures,20 and a state's credibility over time may impact its success in negotiations. 4 Research Design In this section we rst discuss how states' model bits are good measures of treaty prefer- ences, and how a comparison of model bits and concluded bits gives us a valid measure of relative negotiating success. Next, we present a set of indicators that capture the institutional capacities we believe drive negotiating expertise at the state level, before we present our control variables and our choice of model speci cation. 4.1 Measuring negotiation success with model BITs bits are essentially agreements that set reciprocal terms and conditions for investment between pairs of states, and potential dispute-resolution mechanisms.21 Although bits appear largely similar when assessed at face value, there are \signi cant di erences concerning their substantive details" (UNCTAD 2006: xi). Moreover, there are huge di erences in the relative coherence within states' treaty networks, which is indicative of a fundamental asymmetry in BIT negotiations (Alschner and Skougarevskiy 2016a).22 The us-China bit negotiations has for example been under way since 2008, and are at the time of writing still not concluded (Hufbauer, Miner and Moran 2015). 21 bits cover the following areas: de nition of investor and investment (who is protected), admission and establishment (when is protection given), expropriation (lawfulness and compensation), standards of protection (absolute and relative rights), and investor-state dispute settlement (adjudication and enforcement). For a more thorough review of the structure of bits, see Dolzer and Schreuer (2008) and Vandevelde (2010). 22 See also the Alschner and Skougarevskiy's Mapping bits website, where the internal consistency of states' bit networks over time can be explored: http://mappinginvestmenttreaties.com. 20 12 Available model BIT No available model BIT Figure 2: Countries with publicly available model bits An interesting trait of available. Model bits bit negotiations is that many states make model are essentially states' starting point when entering bits bit publicly negotiations (Brown 2013: 2). Models may be prepared by one or both parties to a negotiation, and the use of models has proved to be ecient when developing extensive bit networks.23 The use of model bits is also widespread; developed economies such as Switzerland, Netherlands, Germany, United Kingdom and the United States use them; transition economies like India, Turkey and Malaysia use them; and developing economies such as Benin, Burkina Faso and Uganda use them (see Figure 2). The fact that model bits are made public is interesting. Given the high stakes and general degree of secrecy in economic diplomacy, it would perhaps have been more rational Big bit signers such as Germany (Dolzer and Kim 2013), Switzerland (Schmid 2013) and China (Shan and Gallagher 2013) all use model bits when negotiating investment treaties. As of 2013, Germany had signed 139 bits (of which 130 were in force), Switzerland had signed 130 (116 in force), and China had signed 130 (101 in force). 23 13 to keep preferences undisclosed. But in practice, the use of model bits serve multiple functions. They facilitate the negotiations around the legal content of treaties, whilst at the same time reducing drafting and negotiation costs for countries involved.24 The bottom line is that model bits represent, \inter alia, an expression of a states' investment policy, [and] its negotiation position on the protection of foreign investment" (Brown 2013: 2).25 As such, model bits should represent a more direct expression of state preferences than the exibility vs. protection assumptions derived from a North-South dichotomy. The rst step of our research was therefore to gather all model bits we could nd. We identi ed 92 model texts in total, 90 of which we have a con rmed year of commenced use on. Most of the texts were downloaded from unctad's Investment Policy Hub.26 We also identi ed 25 additional texts in various book volumes (Dolzer and Stevens 1995, Dolzer and Schreuer 2008; 2012, Gallagher and Shen 2009, Brown 2013), some from unctad's old international investment instrument compendiums27 or through direct contact with academics and ministries in relevant countries.28 Of the 90 models in our dated sample, only 70 model texts are matched against concluded bits. Thus, 20 models were dropped either because they were shelved, or because we have no available concluded bit to match it against.29 Next, we downloaded all texts of concluded bits that are available through unctad's Investment Policy Hub, and transformed concluded and model bit pdfs to clean text les with optical recognition software. To measure the degree of negotiation success, we correlate the verbatim of model bits with bits concluded on the basis of the model.30 We follow Spirling (2012) and Alschner and Skougarevskiy (2016a) in using an unsupervised measurement approach based on dividing each text into 5-character substrings (5-grams ) and calculating the similarity between the sets of 5-grams. This yields the dyad-speci c Jaccard similarity coecient, which is de ned as the size of the intersection between the two sets of 5-grams divided by the union of the sets of 5-grams. Denoting the 5-gram for For governments using them, model bits may also contribute to achieving uniformity across ones treaty universe, as has been demonstrated in the development of the United States' bit program (Schill 2009: 91). 25 This does not mean that model bits are states ideal type preferences. Models are most likely \live" documents that negotiators continuously amend. We address this measurement error in Section 4.3 and 4.4. 26 See: http://investmentpolicyhub.unctad.org. 27 See: http://unctad.org/en/Pages/DIAE/DIAE\%20Publications\%20-\%20Bibliographic\ %20Index/International-Investment-Instruments-A-Compendium.aspx 28 A full list of where each model bit was obtained is on record with the authors. 29 Table A1 in the Appendix lists all model texts used in our analysis, and the number of concluded bits matched per model bit. 30 We use the date of signature to identify which model bit to match concluded bits against. However, where it is obvious that bits have been concluded on the basis of earlier models (as negotiations may be lengthy), we swap the match to the former model. 24 14 Similarity 1.0 0.8 0.6 0.4 0.2 1979_netherlands 1984_china 1986_switzerland 1987(I)_netherlands 1989_china 1991_denmark 1991_germany 1991_uk 1993_czech_republic 1993_netherlands 1994_austria 1994_chile 1994_china 1994_us 1995_egypt 1995_hongkong 1995_indonesia 1995_jamaica 1995_srilanka 1995_switzerland 1997_china 1997_netherlands 1998_cambodia 1998_croatia 1998_germany 1998_malaysia 1998_mongolia 1998_southafrica 1998_us 2000_denmark 2000_peru 2000_turkey 2001_finland 2001_greece 2001_iran 2001_korea 2001_russia 2002_austria 2002_belgium 2002_sweden 2002_thailand 2003_canada 2003_china 2003_ghana 2003_india 2003_israel 2003_italy 2003_kenya 2003_uganda 2004_netherlands 2004_romania 2004_us 2005_germany 2005_uk 2006_france 2007_colombia 2007_norway 2008_austria 2008_colombia 2008_germany 2008_ghana 2008_mexico 2008_uk 2009_colombia 2009_macedonia 2009_turkey 2012_usa 2014_serbia 2015_brazil 2015_india 2016_azerbaijan Model2 2016_azerbaijan 2015_india 2015_brazil 2014_serbia 2012_usa 2009_turkey 2009_macedonia 2009_colombia 2008_uk 2008_mexico 2008_ghana 2008_germany 2008_colombia 2008_austria 2007_norway 2007_colombia 2006_france 2005_uk 2005_germany 2004_us 2004_romania 2004_netherlands 2003_uganda 2003_kenya 2003_italy 2003_israel 2003_india 2003_ghana 2003_china 2003_canada 2002_thailand 2002_sweden 2002_belgium 2002_austria 2001_russia 2001_korea 2001_iran 2001_greece 2001_finland 2000_turkey 2000_peru 2000_denmark 1998_us 1998_southafrica 1998_mongolia 1998_malaysia 1998_germany 1998_croatia 1998_cambodia 1997_netherlands 1997_china 1995_switzerland 1995_srilanka 1995_jamaica 1995_indonesia 1995_hongkong 1995_egypt 1994_us 1994_china 1994_chile 1994_austria 1993_netherlands 1993_czech_republic 1991_uk 1991_germany 1991_denmark 1989_china 1987(I)_netherlands 1986_switzerland 1984_china 1979_netherlands Model1 Figure 3: Heat map of distances between English language model bits 15 text i as G , the Jaccard similarity J between a model bit M and bit B is given by: i ( J M; B )= jG \ G j jG [ G j M B M B (1) Theoretically, J (M; B ) ranges from 0 { in the case of complete dissimilarity between the two texts { to 1 in the case of complete similarity. This approach has a number of advantages over more typical bag-of-word approaches to text-as-data-analysis. Most importantly, because we compare sets of 5-grams rather than the frequency of certain terms, we are better able to capture di erences in the ordering of words. Our ability to capture the context of certain phrases is also increased by the fact that our approach does not require removal of stop-words or reliance on extensive pre-preprocessing of strings that may obscure the meaning of legal phrases. In Figure 3, we charted the textual similarity, as measured by Jaccard similarity coecients, between all the English language model bits in our applied sample.31 As there are very few light squares besides the diagonal, there seem to be substantial variation across di erent states' model bits. To further assess the validity of our success measure, we manually checked whether di erences in verbatim distance between treaty texts actually capture substantive di erences in treaty drafting. While Alschner and Skougarevskiy (2016a: 12) makes a credible case for using Jaccard similarity to compare model bits and concluded bits,32 a closer look at two bits concluded on the basis of the United Kingdom's 1991 model bit shows how a modest word-by-word di erence that is signi cant in legal terms, translates to a substantial change in the Jaccard similarity coecient (see Appendix A.) While the Belarus-United Kingdom bit from 1993 record a relatively high general similarity coecient (0.810) when compared to the 1991 model, comparing the 1994 between Lithuania and the United Kingdom yields a substantially lower Jaccard similarity (0.537).33 However, both treaties are actually bit quite close mirrors of the United Kingdom's model { the recorded di erence in similarity is mainly due to three changes made to the model in the Lithuania-United Kingdom bit: (1) a reformulation of the transfer of funds provision, (2) the addition of a consultation clause, and (3) a clause specifying the temporal application of the treaty.34 In the analysed sample we also use model bits in French (matched with 46 treaties) and Spanish (matched with 10 treaties). 32 See also Allee and Lugg (2016). 33 What is also interesting about this treaty in particular is that we know Lithuania in 1993 actively started working to increase their expertise in the international investment law, and that they adopted a more active approach to investment treaty negotiations than other former Soviet states (Poulsen 2015: 85). 34 The two concluded bits also have di erent dispute settlement provisions, but they correspond to each of the two optional provisions the United Kingdom has in their model. 31 16 Model Austria, 2008 Netherlands, 2004 Austria, 2002 Israel, 2003 USA, 2004 Netherlands, 1997 Mexico, 2008 USA, 1998 United Kingdom, 1991 Denmark, 2000 Malaysia, 1998 Croatia, 1998 Netherlands, 1993 India, 2003 South Africa, 1998 Chile, 1994 United Kingdom, 2008 Switzerland, 1995 Uganda, 2003 Turkey, 2000 Korea, Republic of, 2001 Canada, 2003 France, 1999 Turkey, 2009 Italy, 2003 FYR Macedonia, 2009 China, 1994 Korea,, 2001 Thailand, 2002 Guatemala, 2010 Benin, 2002 China, 1997 Denmark, 1991 France, 1996 Russian Federation, 2001 USA, 1994 Finland, 2001 Germany, 1991 Switzerland, 1986 Sweden, 2002 Cambodia, 1998 China, 2003 Mauritius, 2002 Germany, 1998 Colombia, 2011 China, 1989 Indonesia, 1995 Czech Republic, 1993 Sri Lanka, 1995 Germany, 2005 Burkina Faso, 2002 Romania, 2004 Iran, 2001 Kenya, 2003 Colombia, 2009 Mongolia, 1998 Guatemala, 2003 Jamaica, 1995 China, 1984 Peru, 2000 Greece, 2001 United Kingdom, 1972 0.0 0.3 0.6 Mean similarity between models and BITs Figure 4: Mean similarity between models and treaties. 17 0.9 After matching model bits and concluded bits, we have 746 unique observations. However, the observations are only based on 700 unique treaties, because when both parties to the negotiations use model bits (of which there are 46 instances), the concluded bit enters the data twice (with di erent values on the dependent variable). Figure 4 displays the average Jaccard similarities and standard deviations for all model bits with at least one matched bit in our sample. The more successful negotiating countries are Austria (with their 2002 and 2008 models), the Netherlands (2004 model) and the United States (2004 model). Moreover, the relative success of the United Kingdom's 1991 model treaty is perhaps particularly interesting given the high number of bits that have been negotiated based on this model (24 in our sample). On the other hand of the spectrum, we nd countries such as Peru (2000 model), China (1984 model) and Jamaica (1995 model). 4.2 Institutional capacity We use two indicators to capture the institutional capacity that fosters negotiating expertise at the state level. To capture the relatively broad notion of impartial and merits-based bureaucracies we apply the Bureaucratic Quality (bq) index from the International Country Risk Guide (icrg). The bq index captures the degree to which \the bureaucracy has the strength and expertise to govern without drastic changes in policy or interruptions in government services" at the same time as having "an established mechanism for recruitment and training" (The PRS Group 2012: 7).35 Increased scores on the bq index corresponds with higher bureaucratic quality. To capture the speci c notion of corruption in the civil service, we apply the Public Sector Corruption (psc) index from the Varieties of Democracy (v-dem) dataset (McMann et al. 2016). The psc index captures the extent to which \public sector employees grant favours in exchange for bribes, kickbacks, or other material inducements, and how often [...] they steal, embezzle, or misappropriate public funds or other state resources for personal or family use" (Coppedge et al. 2016: 67). As such, it is a good measure of patronage and nepotism. Higher scores on the psc index indicate higher levels of corruption. It should be noted that since our indicators are indirect measures of negotiating expertise, some might question the potential problem of random measurement error. Aside from the fact that there are close theoretical and empirical links between bureaucratic capacity and corruption control on the one side, and expertise in the bureaucracy on the other (as 35 See: http://www.prsgroup.com/wp-content/uploads/2012/11/icrgmethodology.pdf. 18 discussed in section 3.2), the most likely e ect of using these indirect measures in our analysis is an attenuation of the results.36 Thus, if anything, the indirect measures should represent a tough test of our theoretical relationship. 4.3 Control variables We also control for a number of other aspects that may confound negotiating success. First, as highlighted in the rationalist choice accounts of bit-making (Elkins, Guzman and Sim- mons 2006, Allee and Peinhardt 2014, Simmons 2014), the size of home markets, as a proxy for the potential future fdi a negotiator brings to the table, may have an e ect on the concessions parties are willing to make in the negotiations. We therefore include gross domestic product (gdp) and gross capital formation (gcp) as conrol variables in all of our models. captures the amount of capital invested per year in a country, and is therefore a more direct measure of investment activity than gdp.37 gcf Second, to account for any issue-speci c learning e ect we include two controls. Since the parties' experience from previous negotiations should a ect their negotiating capacity, we generate a cumulative count of previous at the time of concluding a bit bits the parties to the negotiations have concluded in our sample. However, learning may also emanate from exposure to disputes. As demonstrated by Poulsen and Aisbett (2013), countries tend to change their approach to bits after they experience an investor claim. To control for this phenomenon we generate a cumulative count of ita claims each party to the case has experienced at the time of concluding the bit in question. The data on ita claims is taken from the PluriCourts Investment Treaty and Arbitration Database (pitad) (Behn, Berge and Langford 2017). Third, a concern with using model bits as preference measures is that, even though many states have publicly updated their models over time, they are \live" documents. That means that they are probably also incrementally amended without public disclosure. We therefore assume that older model bits are less valid measures of countries' preferences than new ones. To account for this diminishing precision we include a variable that counts the age of each model (number of years the model has been in force) at the time of conclusion of a matched bit. For countries with multiple models, we always let the former model expire This is also referred to as regression dilution, and is driven by random noise in the errors of independent variables, leading to underestimation of the regression slope's absolute value and biasing it towards zero. 37 Both variables are taken from the World Bank's World Development Indicators. See: https://data. worldbank.org/data-catalog/world-development-indicators. 36 19 when a new model is published. Fourth, we control for the e ect of having a large home-base of multinational investors, because outgoing investors may try and pressure their governments to conclude bits that are structured in a certain way (Allee and Peinhardt 2014: 64). A larger investor lobby may also in uence the vigour with which preferences are upheld in bit negotiations. We therefore include a variable that captures the percentage of the worlds' largest multinational corporations head-quartered in the two parties to the bits in our sample.38 Fifth, we control for aspects pertaining to the negotiating parties historic ties such as shared cultural origins and legal systems. We therefore introduce three country-pair dummies: Common legal background to account for the fact that some countries have baseline preferences are more conform than others.39 Shared colonial history, because in these relations the former colonial principal may have knowledge or pressure points vis-a-vis the colony that makes it more capable of dictating the treaty-terms.40 And, alliance ties, because in these relations the parties should be more worried about jeopardising their alliance, and as such be more yielding in the negotiations (Allee and Peinhardt 2010: 11).41 Finally, the use of model bits may in and of itself be a source of negotiating power. If only one party to the negotiations brings an explicit model, that model is likely to be the template from which the negotiations depart.42 As such, the model country is likely to have a type of framing-power going into the negotiations. If both parties use model bits however, the negotiation dynamic should change and it should be more dicult to succeed for both parties. We therefore create a dummy variable that captures model-model negotiations (whether both parties to the negotiation brings a model bit to the table). Descriptive statistics for all variables are reported in Table A2, and the correlations are reported in Figure A1 in the Appendix. These data were obtained directly from Clint Peinhardt, and are taken from the Forbes magazine's annual list of the world's largest multinational corporations. To standardise the list across years, all corporations with revenues above $5 billions 1980 us dollars (Allee and Peinhardt 2014: 64-65). 39 This variable is taken from La Porta, Lopez-de Silanes and Shleifer (2008). The legal systems are French, English, German, Scandinavian or Socialist legal traditions. 40 These data are taken from the Issue Correlates of War (icow) Project Colonial History data set, version 1.0. See: http://www.paulhensel.org/icowcol.html. 41 These data are taken from the Alliance Treaty Obligations and Provisions dataset (Leeds et al. 2002). Only alliances after the Second World War are taken into account, as almost all states were engaged in some sort of alliance during the war. 42 As Poulsen (2015) demonstrates throughout his research on bit-making in the developing world. 38 20 4.4 Estimation We consider a number of strategies to account for hierarchical nature of our dependent variable, where concluded bits are nested in model bits. Our main approach is to acknowledge that there probably are di erences in the rigorousness with which states apply their models, and how far from their baseline preferences they are willing to venture. We therefore apply two di erent estimators. Given the nature of the Jaccard similarity coecient, we use ordinary least square (ols) estimators in both sets of models. In the rst set, we use a random e ects. In these estimations each model bit is given its own intercept, but the intercepts are assumed to fall within a common Gaussian distribution. As such, the estimates are based on the full variance of our data but controls for unobserved heterogeneity at the model treaty level. The random e ects models represent a moderately strong test of our theory. Second, we use ols models, with model bit xed e ects, treaty language xed e ects, and standard errors clustered on model bits. Here we also control for unobserved factors at the model treaty level, and within treaty languages, that may bias the results. With this strategy our estimates are based solemnly on variation in-between bits negotiated on the same model. As such, the xed e ects estimations constitute very strong tests of our theory.43 For all independent variables where it is feasible, we estimate relational observation values, meaning we subtract variable values for non-model states in any pairing from the model state's value.44 This is because we believe that it is the negotiation-speci c asymmetry between the parties' expertise and material assets the matters, rather than each party's negotiating assets having independent e ects on the negotiation outcome. In other words, any given state's ability to persuade it's counterpart, depends on the negotiating expertise of that counterpart. Thus, in negotiation dyads where the model country has a higher value on a relational independent variable, the observed value will be positive. In the opposite case, where the partner state scores better than the model state, it will be negative. 5 Results In Figure 5, the bivariate relationships between our two expertise variables and negotiation success is depicted. Both scatter plots indicate that increasing di erences between negotiating parties' institutional structures conducive to expertise seem to co-vary with increased 43 44 See the number of bits concluded per model bits in Table A1 in the Appendix. In the regressions tables below we use to denote variables that are estimated in relational terms. 21 ● ● ● 0.50 0.25 ● ● ● ● ● ● ● ●● ● ●● ● ● ● ● ● ● ● ● ● ●● ● ● ● ●● ●● ● ● ● ● ● ●● ● ● ● ● ● ● ●● ● ●●● ● ● ●● ● ●● ●●● ● ●● ● ● ● ● ●●● ● ● ● ●● ● ● ●● ● ● ● ● ● ●● ● ● ● ●● ●● ●● ●● ● ● ●● ● ●● ● ● ● ● ● ● ●●●●● ●● ●●● ● ● ●● ●● ● ● ● ● ● ● ●● ●● ●● ●● ● ●● ● ● ● ●● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ●● ●● ● ● ●● ●● ● ● ● ● ● ● ● ● ● ●● ● ● ●● ●●● ● ●● ● ● ● ●● ● ●● ● ● ● ● ●● ● ● ● ●●●● ● ● ●●●● ● ●● ● ●● ● ● ● ● ● ●● ● ● ● ●● ● ● ● ● ● ●● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ●● ● ●●● ● ● ●● ● ●● ●● ● ● ●●● ● ● ● ● ● ● ● ● ●● ● ●● ● ● ● ● ● ●● ● ● ●● ● ● ●● ● ● ● ●●● ●● ● ●● ● ● ● ●●● ● ●● ● ● ● ● ●●● ● ●●●● ●● ● ● ● ● ● ●● ● ● ●● ● ● ● ● ● ● ● ●● ● ●●● ● ● ● ● ● ● ● ● ● ●● ● ● ●● ● ● ● ●● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ●● ●● ● ● ● ● ● ● ● ● ● ●● ● ●●● ● ●● ● ●● ● ● ●● ● ● ●● ● ●● ● ● ● ●● ●●● ● ● ● ● ● ●● ● ● ● ● ● ●● ● ● ●● ● ●● ●● ●● ●●●● ● ● ● ● ● ●●● ●●● ● ● ● ● ●● ● ● ●●● ● ●● ●● ● ● ● ●● ●●●●● ● ● ●● ● ● ● ● ● ●● ●● ● ● ●● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● 0.75 Similarity Between Model and BIT ● ● ● ● ●● ● ● ● ● ● ● 0.75 ● ● ● ● ● ● Similarity Between Model and BIT ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 0.50 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 0.25 ●● ● ● ● ● ● ● ●● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ●● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●● ● ●● ● ● ●● ● ● ● ●●● ● ● ●●● ● ● ● ●● ● ●●● ●●●● ●●● −1.0 ● ● ● ● ● ● ● ● 0.00 ● ● ● ● ● ● ● ● ● ● −0.5 ● ● ● 0.0 0.00 ● ● −2 0.5 ● ● 0 ● ● ● ● ● ● 2 4 Difference in bureaucratic_quality Difference in public sector corruption Figure 5: Negotiating expertise and success in bit negotiations. success in bit negotiations. The results from our multivariate analyses presented in Ta- ble 1 and 2 reveal that the bivariate relationships largely hold true when controlling for other dyad-speci c factors, state learning and historic ties between the negotiating parties. As such, our theory of power-as-expertise seem very robust across both estimation strategies. When model states have higher quality bureaucracies, or lower levels of public sector corruption than their negotiating partner, they tend to exhibit higher levels of preference attainment in bit bit negotiations { meaning they manage to reproduce more of their model verbatim in concluded bits. While we expected that the size of e ects and the levels of signi cance for the two expertise variables would decreasing as we move from the random e ects to the xed e ects models, the fact that we nd relationships signi cant at the 95% level in the xed e ects models is a very strong indication that expertise is associated with success in 22 bit negoti- Table 1: Random intercept models: Similarity between model and negotiated BIT ICRG Bureaucratic quality, standardized Public sector corruption, standardized GDP (in millions), standardized Gross capital formation, standardized ITA exposure, model state ITA exposure, partner state BITs signed Years since model Share of MNCs Same legal origin Shared colonial history Alliance tie Partner state has model AIC BIC Log Likelihood Num. obs. Num. groups: modelBITid Var: modelBITid (Intercept) Var: Residual 0 001, 0 01, 0 05. Random intercept for model BITs. p < : p < : p < Model 1 Model2 Model 3 0 16 (0 05) 0 15 (0 04) 0 09 0 12 0 09 (0 07) (0 08) (0 07) 0 05 0 01 0 05 (0 03) (0 04) (0 03) 0 30 0 42 0 32 (0 16) (0 17) (0 16) 0 26 0 22 0 27 (0 10) (0 11) (0 10) 0 00 0 00 0 00 (0 00) (0 00) (0 00) 0 03 0 03 0 03 (0 01) (0 01) (0 01) 1 27 0 37 0 61 (1 21) (1 45) (1 25) 0 24 0 19 0 26 (0 07) (0 08) (0 07) 0 08 0 10 0 08 (0 11) (0 13) (0 12) 0 16 0 15 0 15 (0 07) (0 10) (0 08) 0 21 0 25 0 20 (0 09) (0 10) (0 09) 1445.78 1183.47 1400.35 1508.41 1247.02 1466.79 -708.89 -576.74 -685.17 648 511 620 68 63 68 0.40 0.35 0.37 0.40 0.42 0.41 : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : ations. Especially when viewed in light of the expected attenuation of our results induced by the indirect measures of negotiating expertise. When interpreting the ndings from the xed e ects models substantively, one standard deviation increase in the di erence between model states' and partner states' bureaucratic quality is associated with a 0.11 standard deviation increase in similarity between model bits concluded bits. Inversely, one standard deviation increase in the di erence between model states' and partner states' public sector corruption is found to increase the distance between model bits concluded bits by 0.13 standard deviations. There are also a couple of other ndings that warrant comments. First, model 1 in both Table 1 and 2 are baseline models estimated with control variables only. Given the amount of studies that nd the size of states' home investment markets to impact success in bit negotiations, we would have expected that high, positive di erences between model states' and negotiating partners' levels of production (gdp) and investment (gcf) would to lead to increased negotiating success. But neither economic variable is statistically signi cant in 23 Table 2: Fixed e ects models: Similarity between model and negotiated BIT Model 1 Model 2 Model 3 ICRG Bureaucratic quality, standardized 0 11 (0 06) Public sector corruption, standardized 0 13 (0 05) GDP (in millions), standardized 0 12 0 11 0 12 (0 09) (0 10) (0 09) Gross capital formation, standardized 0 05 0 03 0 05 (0 04) (0 05) (0 04) ITA exposure, model state 0 27 0 41 0 30 (0 21) (0 21) (0 23) ITA exposure, partner state 0 29 0 26 0 31 (0 11) (0 12) (0 11) BITs signed 0 00 0 00 0 00 (0 00) (0 00) (0 00) Years since model 0 02 0 02 0 02 (0 01) (0 02) (0 01) Share of MNCs 1 84 0 99 1 43 (1 14) (1 47) (1 20) Same legal origin 0 27 0 22 0 28 (0 07) (0 08) (0 07) Shared colonial history 0 06 0 12 0 06 (0 09) (0 12) (0 09) Alliance tie 0 17 0 17 0 17 (0 06) (0 08) (0 06) Partner state has model 0 23 0 27 0 22 (0 12) (0 13) (0 12) : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 0 001, 0 01, 0 05. Standard errors are clustered on model BITs. Fixed e ects for model treaties and treaty language are estimated but not reported. p < : p < : p < : any of the baseline models. This non- nding remains robust through all models controlling for institutional capacity. One interpretation of these ndings is that the insistent focus on the material context and rational choice logic when modelling bit negotiations is incoherent with the actual negotiation dynamics at play, and that the social context seems to matter more than previously assumed. It should be noted however that previous studies may have found states' material assets to matter due model speci cation issues. First, deriving static state preferences from the North-South dichotomy may have impacted the results.45 More importantly however, the use of non-relational variable speci cation may have impacted ndings in previous studies. That is, by entering the negotiating states' economic performance values independently in regressions instead of estimating the relative di erence between the parties, one assumes that each party's material assets have an independent e ect on negotiating outcomes. In Table A6 in the Appendix we re-estimate our three main models with this kind of nonrelational variable speci cation. And indeed, when assessed non-relationally, home markets seem to matter more for negotiation outcomes. Second, turning to the variables that capture state learning we nd strong support for 45 But, see Allee and Lugg (2016). 24 the assumption that non-model negotiating parties become better negotiators after they experience investment arbitration claims under previously negotiated bits. However, we do not nd states using model bits in our sample to exhibit the same learning e ect. There might be a di erent reasons for this. Even though we have identi ed states that use model bits all along the scale of economic development, the majority of concluded bits in our sample are based on models from states with relatively high levels of institutional capacity.46 As such, one can assume that the potential for learning should be larger for most partner states. Moreover, the mere task of formulating a model bit in and of itself may also induce issue-speci c learning before the negotiation.47 Poulsen and Aisbett (2013) highlight another interesting point { the potential economic downside to ita cases represents a comparatively larger burden for developing states than developed states. Therefore, they may also be more likely to `react' when exposed to ita claims. As for exposure to previous bit negotiations, we nd no signi cant e ect from having participated in more negotiations than ones counterpart. One way of interpreting this is that the generation and retention of negotiating expertise within state apparatuses is more important to success in bit negotiations than issue-speci c learning through experience. Third, we nd strong, positive relationships between two of the variables capturing historic ties and success in bit-making. When the model state has the same legal origin as the partner state, there is a signi cant and relatively strong, positive e ect on how close concluded bits resemble model bits. The same goes for alliance ties. Having a shared colonial history with ones negotiating partner however, does not seem to signi cantly impact model states ability to attain their treaty preferences. This might be a re ection of how newly independent colonies for a long time viewed bits as a continuation of colonial era economic dominance (Poulsen 2015: 50-51). Lastly, there seem to be some changes to the negotiating dynamic when both parties to the negotiations have model bits. We nd a relatively stable, negative e ect on the model state's preference attainment when the partner country also brings a model bit to the table. This is at least an indication that negotiating with explicit preferences reduces the `framing' e ect of negotiating based on someone else's default draft. Our general conclusion based on these ndings is that expertise seem to matter more 63 percentage of all concluded bits in the sample where based on models from states with a score of 3 or higher on the bureaucratic quality indicator, and 45 percent are given the highest score (4). 47 But, there are also examples of developing states simply `adopting' other states' model bits, assuming their due diligence to suce (Poulsen 2015). 46 25 than previous (quantitative) empirical analyses of bit-making have accounted for. Instead of starting with the default rational choice assumptions when assessing the state-state interaction, we believe that analysing the social context in which any given negotiation takes place should be the vantage point of researchers. And, in the context of bit negotiations, which we know are carried out behind closed doors with little public scrutiny and only a few negotiators at the table, the ability to argue, persuade and compromise seems to be of particular importance. As such, our analysis yields further con rmation of the importance of focusing on expertise in international negotiations in general, as highlighted by Risse (2000; 2004) { and in economic diplomacy in particular, as championed by Poulsen (2015). 5.1 Robustness checks In Tables A3-A6 in the Appendix, we present the results from a series of robustness checks. The main message is that our ndings are robust to alternative dependent variable construction, and alternative measures of negotiating expertise { while they are less robust to non-relational speci cation of independent variables. We comment on each model in brief. First, we consider di erent ways to construct our dependent variable. In our main analysis, we followed Spirling (2012) and Alschner and Skougarevskiy (2016a) in comparing sets of 5-character substrings (5-grams ) to estimate Jaccard similarities between model bits and concluded bits. In Tables A3 and A4 we test how sensitive the above results are to this dependent variable speci cation by re-running the xed e ects models with 4-character and 6-character substrings respectively. Our main results are re-produced in the 6-gram models, while the e ect of bureaucratic quality is weakened in the 4-gram models. The directionality of the coecients however, remain the same in both sets of models. Third, in Table A5 we apply two alternative measures of bureaucratic quality and public sector corruption to those applied in our main analysis. The former is swapped for the government e ectiveness index from the World Bank's World Governance Indicators,48 and the latter with the control of corruption index, also from robust to these alternative operationalisations.50 wgi.49 Our main ndings are 48 The government e ectiveness index captures \perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies." (Kaufmann, Kraay and Mastruzzi 2010: 4). 49 The control of corruption index captures `perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests' (Kaufmann, Kraay and Mastruzzi 2010: 4). 50 The reason why the direction of the coecient for corruption is inverted is that the World Bank indicator 26 Our last robustness check is the aforementioned non-relational variable speci cation (Table A6). There are a couple of things to note. Above we mentioned that the material context seems to become more relevant when the states assets are modelled independent of each other. But what is interesting is that it is only the size of the partner state's home market that has a signi cant e ect on the negotiation outcome, and a negative at that. Although we still believe that this way of modelling is not appropriate (if the material context matter, negotiating parties are still likely to weigh each others assets explicitly up against each other), this nding is an indication that the stronger the home economy of a non-model country is, the harder a bargain they might drive when engaging with a counterpart's model bit. As for the e ect of our expertise indicators, we attain statistically signi cant e ects only for the partner country's public sector corruption. Again, bearing in mind that we do not believe this is the adequate variable speci cation, the short interpretation would be that the lower the distance between the public sector corruption of the model and the non-model state, the more do the non-model state pull the model state away from its pre-negotiation preferences. The fact that we nd no statistically signi cant e ects for the model country might be because the state that brings the Model bit tend to de ne the starting point for the negotiations. As such, the outcome as measured in similarity with the starting point might be more sensitive to the negotiation expertise of the non-model party than the model party. It might also be a function of the degrees of variance that exists within the two groups of countries. 6 Conclusion, policy relevance and the way forward In this paper we nd strong evidence for our claim that negotiating expertise is an overlooked, but important predictor of states' success when negotiating bits. Moreover, we nd that the rationalist accounts focusing on material assets as bargaining chips, and more traditional coercive power accounts of bit-making, seem to have underestimated the particular context in which bits are negotiated. In short, bits have been crafted on an ad-hoc basis by a handful of state representatives, in negotiations behind closed doors that have received little public scrutiny (historically at least). Taking those idiosyncrasies into account, one major contribution of this research is to build an quantitative empirical account that reconciles qualitative research on knowledge asymmetries in economic diplomacy (Poulsen 2014; measures control of corruption as opposed to the levels of corruption measured by v-dem. 27 2015), with theory of deliberation and arguing (Risse 2000; 2004). As such, this research is to a larger extent than previous quantitative studies of bit-making grounded in what we actually know about the dynamics inside the black box of the negotiations. Another important contribution is that we also moor our study of negotiating success to more detailed, precise and, we would argue, relevant state preferences. We thus move away from the somewhat simplistic empirical manner in which treaty preferences are assumed based on the capital-exporter vs. capital-importer dichotomy. Instead, we use ideal type preferences, as expressed in states' model bits bits, as benchmarks against which concluded are assessed. To the best of our knowledge, or sample of model bits is the largest hitherto gathered. What has inspired this approach are recent moves towards using text as data in political science (Spirling 2012), and international economic law (Alschner and Skougarevskiy 2016a, Alschner, Pauwelyn and Puig 2017). We use advanced techniques for comparing treaty texts, and constructing dyad-speci cs measure of success in bit ne- gotiations. As such, this study lies at the methodological forefront, and our method has important empirical advantages: We do not have to make uninformed, ex ante assumptions around states preferences (other than assuming that model bits represent relatively `true' preferences). When looking at how certain states have used multiple bits over time, we can also account for how they sometimes update their preferences. Lastly, we can analyse how all the preferences expressed in bits are ltered through negotiations, instead of just looking at strength of procedural mechanisms (Allee and Peinhardt 2010; 2014). This ndings in this paper are also relevant for the public policy debate around investment treaties. First, the wider implication of our analysis is that insulating and nurturing civil service systems conducive to the generation, retention and application of expertise is important to gain access to rule-writing at the international level. More speci cally, for states engaged in negotiating or re-negotiating bits, the normative implications emanat- ing from our analysis echo those voiced by Lauge Poulsen. If states do not have domestic bureaucratic system in place that caters for expertise, they should work to \increase the problem-solving capabilities of ocials in charge of negotiating investment treaties", and that for \governments that have the resources, a key long term strategy to pursue more rational bit policies would be to invest in [...] `in-house' experts" (Poulsen 2015: 194). The main message is that knowledge asymmetries trump power asymmetries, and as the sizes of awards rendered under investment treaty arbitration has shown { stakes are high. As ours is one of the rst quantitative studies of 28 bit-making that use model bits to measure preferences, there are plenty of avenues for future research. Once we are able to break down treaty texts into meaningful sub parts (partitioning them at the provision level), more targeted studies of where in the treaties the battles rage when states negotiate can be carried out. Studies could also explore which rules states mostly agree on (i.e. `the lowest common denominator'). This research could provide valuable input into the debate around whether we actually need a multilateral investment treaty or not (Berge and Hveem 2017). Qualitatively, more research into how model bits are applied in practice, and the framing e ects that using models may induce, is also needed. While broad, descriptive accounts of states' model bit programs exist (Brown 2013), we still know little of how model bits are used in practice. From o the record conversations with treaty negotiators we know that some states are more bound to the mast when bringing a model to the table, while others have substantial leeway in compromising. But, many factors, both at the domestic and international level, are likely to a ect how true states are to their models. Diving deeper into this dynamic could provide states help to better understand how they should prepare for international negotiations in general, and investment treaty negotiations in particular. Lastly, while research like ours go at great length to statistically model a version of reality that is as close to the true world, we still know very little about how the actual dynamics in bit negotiations play out, or what personnel states use to negotiate. Here there is both room for qualitative research targeted at interviewing negotiators about negotiation dynamics, and what types of expertise it is that matters. It is for example common in broader literature on international negotiations to distinguish between three alternative types of expertise: content expertise, expertise on the process and preference information (Tallberg 2008: 702). 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University of Michigan Press. 37 A Validating model BITs as ideal preferences Below you see the United Kingdom's preferred wording of the transfer of funds provision, as per their 1991 model bit, compared to the transfer provision in the 1994 bit with Lithuania: United Kingdom model BIT (1991) Lithuania-United Kingdom BIT (1994) Article 6 - Repatriation of Investment and Returns Article 6 - Repatriation of Investment and Returns Each Contracting Party shall in respect of investments guarantee to nationals or companies of the other Contracting Party the unrestricted transfer of their investments and returns. Transfers shall be e ected without delay in the convertible currency in which the capital was originally invested or in any other convertible currency agreed by the investor and the Contracting Party concerned. Unless otherwise agreed by the investor transfers shall be made at the rate of exchange applicable on the date of transfer pursuant to the exchange regulations in force. (1) Subject to paragraph (2) below, each Contracting Party shall in respect of investments guarantee to nationals or companies of the other Contracting Party the unrestricted transfer of their investments and returns. Transfers shall be e ected without delay in the convertible currency in which the capital was originally invested or in any other convertible currency agreed by the investor and the Contracting Party concerned. Unless otherwise agreed by the investor transfers shall be made at the rate of exchange applicable on the date of transfer pursuant to the exchange regulations in force. (2) During a transitional period of 3 years from the entry into force of this Agreement the Republic of Lithuania shall make every effort to make available the foreign currency needed for the unrestricted transfer of investments and returns. (3) After expiry of the transitional period referred to in paragraph (2) above, paragraph (1) above shall apply without restriction. As highlighted in the provision, instead of accepting the wholesale wording from the United Kingdom's model, Lithuania negotiated in a partial carve-out that gave them a three year transitional period where repatriation of capital is dependent upon the availability of the currency needed for unrestricted transfer. This is a legally important amendment, as it gives them time to adapt to the new rules in an era where foreign currency was a scarce resource in post-Soviet states. Moreover, they negotiated in two additional clauses that are not found in the United Kingdom's model. The rst is a consultation clause that has more symbolic than practical value (Vandevelde 2010: 500), but the latter article is of more legal value. It grants investments made before the treaty went into force protection, with one important caveat: investments made before the fall of the Soviet Union must have been made in accordance with laws and regulations: 38 Lithuania { United Kingdom BIT (1994) B Article 12 { Consultations Article 13 { Application of the Agreement Either Contracting Party may propose to the other Contracting Party that consultations be held on any matter affecting the application of this Agreement. These consultations shall be held at a time and place agreed upon through diplomatic channels. This Agreement shall apply to investments made by the nationals and companies of one Contracting Party in the territory of the other Contracting Party after 29 December 1990. Investments made before that date shall also bene t from the provisions of this Agreement provided these were admitted in accordance with the laws and regulations of the latter Contracting Party. Models BITs and Negotiated Treaties Table A1: Number of BITs signed under each Model BIT Model state Year of model BITs signed under the model Austria 2002 7 Austria 2008 2 Benin 2002 2 Bolivia, Plurinational State of 2002 1 Brazil 2015 1 Burkina Faso 2002 2 Burundi 2002 1 Cambodia 1998 9 Canada 2003 7 Chile 1994 2 China 1984 15 China 1989 25 China 1994 8 China 1997 15 China 2003 20 Colombia 2008 1 Colombia 2009 3 Continued on next page 39 Table A1: Number of BITs signed under each Model BIT Model state Year of model BITs signed under the model Colombia 2011 2 Croatia 1998 28 Czech Republic 1993 13 Denmark 1991 15 Denmark 2000 12 Finland 2001 35 France 1996 18 France 1999 20 Germany 1991 5 Germany 1998 15 Germany 2005 8 Germany 2008 1 Ghana 2003 1 Greece 2001 6 Guatemala 2003 5 Guatemala 2010 2 India 2003 30 Indonesia 1995 33 Iran 2001 9 Israel 2003 7 Italy 2003 4 Jamaica 1995 2 Kenya 2003 2 Korea, 2001 13 Korea, Republic of 2001 15 Macedonia, The former Yugoslav Republic of 2009 3 Malaysia 1998 6 Mauritius 2002 3 Mexico 2008 2 Continued on next page 40 Table A1: Number of BITs signed under each Model BIT Model state Year of model BITs signed under the model Mongolia 1998 17 Netherlands 1993 8 Netherlands 1997 38 Netherlands 2004 5 Peru 2000 3 Romania 2004 3 Russian 2001 1 Russian Federation 2001 2 South Africa 1998 23 Sri Lanka 1995 9 Sweden 2002 6 Switzerland 1986 22 Switzerland 1995 49 Thailand 2002 9 Turkey 2000 20 Turkey 2009 8 Uganda 2003 2 United Kingdom 1972 43 United Kingdom 1991 24 United Kingdom 2005 1 United Kingdom 2008 2 USA 1994 8 USA 1998 5 USA 2004 2 C Descriptive statistics D Robustness checks 41 Table A2: Descriptive statistics Statistic Jaccard similarity ICRG Bureaucratic quality Public sector corruption GDP (in millions) Gross capital formation ITA exposure, model state ITA exposure, partner state BITs signed Years since model Share of MNCs Same legal origin Shared colonial history Alliance tie Partner state has model N 746 570 710 700 673 746 746 742 746 746 725 746 746 746 Mean 0.00 0.00 0.00 0.00 0.00 0.05 0.08 22.63 3.57 0.03 0.30 0.10 0.20 0.12 St. Dev. 1.00 1.00 1.00 1.00 1.00 0.21 0.27 26.81 3.63 0.06 0.46 0.30 0.40 0.33 Min 2.21 2.59 1.63 3.91 5.53 0 0 1 0 0.27 0 0 0 0 Max 1.95 2.06 2.58 8.93 3.65 1 1 165 18 0.40 1 1 1 1 Partner_state_has_model Alliance_tie Shared_colonial_history 0.09 −0.13 0.42 0.01 −0.07 0.05 0.08 0.07 −0.16 0.08 −0.04 0.07 −0.04 0.05 0.02 −0.32 −0.01 −0.13 −0.02 0.49 0.11 −0.02 0.02 −0.05 −0.07 0.16 −0.08 0.11 0.04 0.04 0.06 −0.04 0.07 0.14 −0.02 −0.5 −0.07 −0.04 −0.14 −0.01 −0.11 −0.14 −0.07 −0.11 −0.1 −1.0 0.14 0.15 0.05 −0.26 −0.04 0.77 −0.01 0.06 0.14 −0.14 −0.2 0.19 0 −0.1 0.3 −0.13 −0.43 −0.03 −0.06 0.02 0.19 −0.8 0.28 −0.11 −0.05 0.07 −0.38 0.12 0.49 0.01 −0.01 −0.01 −0.24 −0.23 0.13 −0.03 −0.04 −0.01 −0.14 −0.24 0.12 0.11 0.05 0.03 −0.17 Same_legal_origin Difference_in__Share_of_MNCs Years_since_model Difference_in__BITs_signed ITA_exposure_partner ITA_exposure_model Difference_in__GCF Difference_in__GDP Difference_in__Public_sector_corruption Difference_in_ICRG_Bureaucratic_quality Jaccard_distance 0.27 −0.06 Figure A1: Bivariate correlations 42 1.0 0.5 0.0 Table A3: Fixed e ects models: 4-gram Similarity between model and negotiated BIT Model 1 Model 2 Model 3 ICRG Bureaucratic quality, standardized 0 06 (0 05) Public sector corruption, standardized 0 09 (0 05) GDP (in millions), standardized 0 10 0 09 0 10 (0 08) (0 09) (0 08) Gross capital formation, standardized 0 04 0 01 0 04 (0 04) (0 05) (0 04) ITA exposure, model state 0 30 0 40 0 32 (0 23) (0 23) (0 24) ITA exposure, partner state 0 27 0 25 0 28 (0 11) (0 12) (0 12) BITs signed 0 00 0 00 0 00 (0 00) (0 00) (0 00) Years since model 0 02 0 02 0 02 (0 01) (0 02) (0 01) Share of MNCs 1 68 1 10 1 44 (1 03) (1 38) (1 09) Same legal origin 0 26 0 23 0 28 (0 07) (0 08) (0 07) Shared colonial history 0 06 0 08 0 07 (0 08) (0 10) (0 08) Alliance tie 0 16 0 18 0 16 (0 06) (0 07) (0 05) Partner state has model 0 23 0 27 0 22 (0 12) (0 13) (0 12) : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 0 001, 0 01, 0 05. Standard errors are clustered on model BITs. Fixed e ects for model treaties and treaty language are estimated but not reported. p < : p < : p < : Table A4: Fixed e ects models: 6-gram Similarity between model and negotiated BIT Model 1 Model 2 Model 3 ICRG Bureaucratic quality, standardized 0 15 (0 06) Public sector corruption, standardized 0 15 (0 05) GDP (in millions), standardized 0 13 0 13 0 13 (0 09) (0 11) (0 10) Gross capital formation, standardized 0 07 0 03 0 07 (0 04) (0 05) (0 04) ITA exposure, model state 0 25 0 41 0 28 (0 20) (0 20) (0 22) ITA exposure, partner state 0 31 0 26 0 32 (0 11) (0 12) (0 11) BITs signed 0 00 0 00 0 00 (0 00) (0 00) (0 00) Years since model 0 02 0 02 0 02 (0 01) (0 02) (0 01) Share of MNCs 1 87 0 82 1 35 (1 18) (1 49) (1 24) Same legal origin 0 26 0 21 0 28 (0 07) (0 09) (0 07) Shared colonial history 0 05 0 15 0 06 (0 10) (0 13) (0 09) Alliance tie 0 17 0 16 0 17 (0 06) (0 08) (0 06) Partner state has model 0 22 0 26 0 21 (0 12) (0 13) (0 12) : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 0 001, 0 01, 0 05. Standard errors are clustered on model BITs. Fixed e ects for model treaties and treaty language are estimated but not reported. p < : p < : p < : 43 Table A5: Fixed e ects models: Similarity between model and negotiated BIT WGI government e ectiveness, standardized WGI corruption control, standardized GDP (in millions), standardized Gross capital formation, standardized ITA exposure, model state ITA exposure, partner state Years since model Share of MNCs Same legal origin Shared colonial history Alliance tie Partner state has model Model 1 0 23 (0 10) Model 2 : : 0 23 (0 10) 0 08 (0 09) 0 04 (0 05) 0 30 (0 25) 0 42 (0 13) 0 03 (0 02) 2 34 (2 46) 0 21 (0 11) 0 01 (0 08) 0 16 (0 11) 0 33 (0 12) : 0 07 (0 09) 0 03 (0 05) 0 29 (0 25) 0 39 (0 13) 0 03 (0 02) 2 50 (2 35) 0 22 (0 11) 0 04 (0 08) 0 16 (0 11) 0 32 (0 12) : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 0 001, 0 01, 0 05. Standard errors are clustered on model BITs. Fixed e ects for model treaties and treaty language are estimated but not reported. p < : p < : p < : 44 Table A6: Non-relational xed e ects models ICRG Bureaucratic quality, Model country, standardized ICRG Bureaucratic quality, Partner country, standardized Public sector corruption, Model country, standardized Public sector corruption, Partner country, standardized log(GDP (in millions)), Model country log(GDP (in millions)), Partner country log(Gross capital formation), Model country log(Gross capital formation), Partner country ITA exposure, model state ITA exposure, partner state BITs signed, Model country Years since model Share of MNCs, model country Share of MNCs, partner country Same legal origin Shared colonial history Alliance tie Partner state has model Model 1 : : : p < : p < : 45 0 21 (0 15) 0 07 (0 03) 4 23 (5 50) 3 41 (0 51) 0 05 (0 25) 0 03 (0 03) 0 29 (0 21) 0 24 (0 10) 0 00 (0 00) 0 01 (0 02) 4 16 (2 78) 0 09 (0 94) 0 25 (0 06) 0 04 (0 10) 0 15 (0 06) 0 14 (0 10) : : : 3 59 (4 81) 3 15 (0 64) 0 08 (0 24) 0 03 (0 03) 0 25 (0 19) 0 23 (0 10) 0 00 (0 00) 0 01 (0 02) 3 42 (2 36) 0 42 (0 97) 0 24 (0 06) 0 09 (0 12) 0 14 (0 07) 0 16 (0 10) : : : : : : : : : : : : : : : : : : : : : : : : : : : 0 001, 0 01, 0 05. Standard errors are clustered on model BITs. Fixed e ects for model treaties and treaty language are estimated but not reported. : Model 3 : : p < Model 2 0 04 (0 32) 0 01 (0 04) 4 62 (5 48) 3 76 (0 59) 0 01 (0 35) 0 02 (0 03) 0 36 (0 20) 0 24 (0 11) 0 00 (0 00) 0 00 (0 02) 7 04 (4 72) 0 38 (1 00) 0 23 (0 08) 0 11 (0 12) 0 14 (0 09) 0 18 (0 10) : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :