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Negotiating BITs with models

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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: [email protected]
Dept. of Political Science and PluriCourts, University of Oslo. E-mail: [email protected]
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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.
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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.
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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).
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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).
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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.
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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
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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
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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
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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
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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).
Dependant upon the availability of background data on the negotiators, there is also room
for large-N studies of how negotiating experience and other background factors a ect their
ability to champion their principals' preferences.
29
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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)
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
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