Are BITs Really All About Politics?

Here's an excerpt from a paper by U. of Chicago law prof Adam Chilton:

Given the limited interest in—and evidence of—the investment benefits of BITs, it is worth reconsidering why the United States actively pursued a BITs program for three decades. I argue that the dominant narrative misses the mark: the United States did not primarily form BITs to promote and protect investments abroad, but instead to improve relationships with politically important developing countries. BITs have been used in this way because they have several features that make them an appealing foreign policy tool: they do not necessitate outlaying funds, require the United States to make only “redundant” obligations, are easy to sell politically, and take minimal effort to negotiate given their standardized nature. Having a BIT with the United States is attractive politically to the governments of many developing countries as well. Potential BIT partners are frequently eager to sign these treaties, even though they are warned that the agreements likely will not lead to new investments, because the treaty provides domestic political benefits to the country’s government. Since international relations are a repeated game, a new treaty partner would thus likely reciprocate by extending political benefits to the United States in order to receive favorable treatment again in the future. The implication of this theory is that investment considerations will not explain which countries the United States has chosen to sign BITs with, and that looking solely at the investment consequences of the treaties ignores many of their potential benefits. Instead, it is my contention that political considerations will better explain which countries the United States has chosen to sign BITs with, and that BITs should be evaluated at least in part based on whether they have generated political dividends.

I empirically test this theory in two ways. First, I test what factors predict the countries that the United States has signed BITs with over the last thirty years. ...

Second, I examine whether signing BITs has produced political benefits for the United States. To do so, I use a recently developed statistical method—life history matching—that helps mitigate the problems of selection bias and post-treatment bias that have plagued most timeseries cross-sectional research designs (Nielsen, n.d.), and that has shown potential as a way to study the effects of treaty ratification (Nielsen and Simmons 2014). I specifically use this method to examine whether signing a BIT with the United States made the treaty partner more likely to: (1) vote similarly to the United States in the United Nations General Assembly; (2) allow the United States to deploy troops within its territory; or (3) support the invasion of Iraq in 2003. My results suggest that having a BIT in effect with the United States cause the treaty partner to be more supportive of the United States in the UN General Assembly, but likely did not alter the number of U.S troop deployed on the partner’s soil or whether the partner joined the Iraq War Coalition. In other words, this study not only shows that the United States chose which states to pursue BITs with based on political considerations, but also that signing BITs likely produced modest political dividends.