International trade agreements lead to more foreign direct investment (FDI) in developing countries. This article examines the causal mechanisms underpinning this trade-investment linkage by asking whether institutional features of preferential trade agreements (PTAs), which allow governments to make more credible commitments to protect foreign investments, indeed result in greater FDI. The authors explore three institutional differences. First, they examine whether PTAs that have entered into force lead to greater FDI than PTAs that have merely been negotiated and signed, since only the former constitute a binding commitment under international law. Second, they ask whether trade agreements that have investment clauses lead to greater FDI. Third, they consider whether PTAs with dispute-settlement mechanisms lead to greater FDI. Analyses of FDI flows into 122 developing countries from 1971 to 2007 show that trade agreements that include stronger mechanisms for credible commitment induce more FDI. Institutional diversity in international agreements matters.
Following older debates in international relations literature concerning the relative importance of domestic versus systemic factors, newer debates emphasize interdependence among states and the complex interactions between systemic and domestic factors. As globalization and democratization advance, theories and empirical models of international politics have become more complicated. We present a systematic theoretical categorization of relationships between domestic and systemic variables. We use this categorization so that scholars can match their theory to the appropriate empirical model and assess the degree to which systemic factors affect their arguments. We also present two advances at the frontier of these empirical models. In one, we combine hierarchical models of moderating relationships with spatial models of interdependence among units within a system. In the other, we provide a model for analyzing spatial interdependence that varies over time. This enables us to examine how the level of interdependence among units has evolved. We illustrate our categorization and new models by revisiting the recent international political economy (IPE) debate over the relationship between trade policy and regime type in developing countries.
The world economy has maintained or enhanced its integration in the past decade even in the face of the global financial crisis. A large part of this globalization has been driven by capital flows. This symposium focuses on one element of these capital flows, foreign direct investment (FDI), and on the regime in place to safeguard and promote such investments around the globe. The articles by Allee and Peinhardt and Simmons focus on the nature and evolution of the bilateral investment treaties (BITs) that have been developed to protect such investments and that have proliferated since the 1990s. The final article, by Büthe and Milner, turns its attention to the ways in which international trade agreements affect FDI. The comparison between the investment and trade agreements is instructive, since they seem to have different effects.
FDI has become one of the most important economic flows in the global economy. It is a critical source of capital for developing countries and remains a significant source of investment in the developed world. FDI has grown in part because countries changed their policies toward it dramatically after the 1980s; governments in developing countries made unilateral policy changes that opened up markets across the globe and increased competition among countries for FDI.
Given the recognition of the seriousness of climate change and other forms of environmental challenges, a growing number of political scientists are working in the environmental area. We have a substantial body of research examining local, regional, and global environmental issues. It is our sense that time is ripe for the field of international and comparative environmental politics to reflect on existing work, integrate it, and clearly articulate directions for future research. This special issue seeks to encourage scholars to systemically examine the roles of domestic and international factors, either alone or in interaction, to develop more nuanced models of environmental politics across space and time. We hope that the papers here will help to define the research frontier for the environmental politics field. Collectively, they exemplify recent efforts in comparative and international environmental politics that are, first, explanatory in orientation; second, cross levels of analysis in a way that transcends artificial subdisciplinary distinctions; and finally, are based on application of a variety of research methods and modeling techniques standard among the wider political science community.
Developing countries have increasingly opened their economies to trade. Research about trade policy in developed countries focuses on a bottom-up process by identifying economic preferences of domestic groups. We know less about developing countries. We analyze how economic and political variables influenced Costa Rican voters in a referendum on CAFTA-DR, an international trade agreement. We find little support for Stolper–Samuelson models of economic preferences, but more support for specific factor models. We also isolate the effects of political parties on the referendum, controlling for many economic factors; we document how at least one party influenced voters and this made the difference for CAFTA-DR passage. Politics, namely parties using their organizational strength to cue and frame messages for voters, influenced this important trade policy decision. Theories about trade policy need to take into account top-down political factors along with economic interests.
Why do governments choose multilateralism? We examine a principal-agent model in which states trade some control over the policy for greater burden sharing. The theory generates observable hypotheses regarding the reasons for and the patterns of support and opposition to multilateralism. To focus our study, we analyze support for bilateral and multilateral foreign aid giving in the US. Using new survey data, we provide evidence about the correlates of public and elite support for multilateral engagement. We find weak support for multilateralism and deep partisan divisions. Reflecting elite discourse, public opinion divides over two competing rationales–-burden sharing and control–-when faced with the choice between multilateral and bilateral aid channels. As domestic groups' preferences over aid policy diverge from those of the multilateral institution, maintaining control over aid policy becomes more salient and support for multilateralism falls.
International trade has become one of the most potent issues in both domestic and international politics these days. Under the rubric of globalization, international trade has become a contentious issue in domestic politics, as the recent WTO conference in Seattle showed. In international politics, trade is today a premiere instrument of statecraft, as witnessed by the US–China trade agreement and the EU's accession negotiations with the countries of East and Central Europe. How can we explain the trade policy choices that states make? What theories do we possess that illuminate the nature of countries' trade relations?
The study of public opinion and foreign policy has a long history (Almond 1950 Converse 1964; Lippmann 1955). This history includes a long-standing debate over the utility of studying public opinion when considering international affairs (Holsti 1992; Mueller 1971; Page and Shapiro 1983, 1992, Wittkopf 1986). The dismissal of the importance of public opinion stems from the concern that the mass public knows little about foreign policy. Prominent theories about foreign policy and international relations give no role to publics (Krasner 1978; Mearsheimer 2001; Waltz 1979). Very few theoretical perspectives in international relations give any weight to public attitudes; neorealism, neoliberalism, and institutionalism provide very little space for the mass public to affect foreign policy.
Agreements about foreign trade policy have long been key features of the international political economy. Among the most important agreements of this sort are preferential trade agreements (PTAs), which are designed to foster economic integration among member-states by improving and stabilizing the access that each member has to the other participants’ markets. PTAs are a broad class of international agreements that include common markets, customs unions (CUs), free trade areas (FTAs), and economic unions. These agreements have marked the global landscape for centuries, but they have proliferated especially rapidly over the past half-century, and hundreds of them currently dot the international system. The spread of PTAs continues unabated and is one of the most significant trends in the international political economy
Preferential trading arrangements (PTAs) play an increasingly prominent role in the global political economy, two notable examples being the European Union and the North American Free Trade Agreement. These agreements foster economic integration among member states by enhancing their access to one another's markets. Yet despite the importance of PTAs to international trade and world politics, until now little attention has been focused on why governments choose to join them and how governments design them. This book offers valuable new insights into the political economy of PTA formation. Many economists have argued that the roots of these agreements lie in the promise they hold for improving the welfare of member states. Others have posited that trade agreements are a response to global political conditions. Edward Mansfield and Helen Milner argue that domestic politics provide a crucial impetus to the decision by governments to enter trade pacts. Drawing on this argument, they explain why democracies are more likely to enter PTAs than nondemocratic regimes, and why as the number of veto players--interest groups with the power to block policy change--increases in a prospective member state, the likelihood of the state entering a trade agreement is reduced. The book provides a novel view of the political foundations of trade agreements.
In this article we bring together opposing international relations theories to better understand U.S. foreign policy, in particular foreign trade and aid. Using votes in the U.S. House of Representatives from 1979–2004, we explore different theoretical predictions about preferences for foreign economic policy. We assess the impact of domestic factors, namely political economy and ideological preferences, versus foreign policy pressures. Our three main results highlight the differential effect of these factors in the two issue areas. First, aid preferences are as affected by domestic political economy factors as are trade preferences. Second, trade preferences, but not economic aid ones, are shaped by the president's foreign policy concerns; for economic aid, domestic political economy factors matter more than foreign policy ones. Third, aid preferences are shaped more by ideological factors than are trade ones, but ideology plays a different substantive role in each. Different constituencies support aid and trade. This finding has implications for foreign policy substitutability, "the internationalist coalition" in U.S. foreign policy, "statist" theories of foreign policy, and the connection between public opinion and legislative voting.
Recent research, including an article by Charles Kupchan and Peter Trubowitz in this journal, has argued that the United States' long-standing foreign policy orientation of liberal internationalism has been in serious decline because of rising domestic partisan divisions. A reanalysis of the theoretical logic driving these arguments and the empirical evidence used to support them suggests a different conclusion. Extant evidence on congressional roll call voting and public opinion surveys, which is often used to support the claim that liberal internationalism has declined, as well as new evidence about partisan divisions in Congress using policy gridlock and cosponsorship data from other studies of American politics do not demonstrate the decline in bipartisanship in foreign policy that conventional wisdom suggests. The data also do not show evidence of a Vietnam War or a post–Cold War effect on domestic partisan divisions on foreign policy. Contrary to the claims of recent literature, the data show that growing domestic political divisions over foreign policy have not made liberal internationalism impossible. It persists as a possible grand strategy for the United States in part because of globalization pressures.
Are there systematic political economy factors that shape preferences for foreign aid, a key component of American foreign policy? We analyze votes in the House of Representatives from 1979 to 2003 that would increase or decrease foreign aid by considering the political, economic, and ideological characteristics of legislators and their districts. To understand who supports and opposes foreign aid, we utilize theories of foreign economic policy preferences. By examining different types of aid policy, we show that domestic politics and especially the distributional consequences of economic aid can matter. The economic characteristics of a district and its left–right ideological predispositions influence support for aid in a systematic fashion over the nearly 25-year period. Stolper–Samuelson models along with political ideology can help explain legislators' preferences toward aid.
Preferential trading agreements (PTAs) are proliferating rapidly. Scores of these institutions have formed over the past half century and almost every country currently participates in at least one. By 2006, according to the World Trade Organization (WTO), nearly 300 PTAs were in force, covering approximately half of the overseas trade conducted worldwide.' Why states have chosen to enter such arrangements and what bearing the spread of PTAs will have on international affairs are issues that have generated considerable controversy. Some observers fear that these arrangements have adverse economic consequences and have eroded the multilateral system that has guided international economic relations in the post-World War II era. Others argue that such institutions are stepping stones to greater multilateral openness and stability. This debate has stimulated a large body of literature on the economic and political implications of PTAs. Surprisingly little research, however, has analyzed the factors giving rise to these arrangements. The purpose of this article is to help fill that gap.
We address two questions that are central to the literature on the emergence of democracy and economic globalization. First, does democratization foster higher levels of trade and capital account openness? Second, do trade and capital account openness increase the likelihood of democratization? We review the literature in international political economy and comparative politics that has theoretically and empirically addressed these questions. We then conduct some empirical tests in a sample of developing countries to briefly evaluate the empirical relationship between democracy and economic globalization. Our analysis reveals that evidence for the claim that democracy fosters trade and capital account liberalization is robust but that empirical support for the predicted positive effect of economic openness on democracy among developing countries is weak. More theoretical work is needed to clarify the link between democracy and economic liberalization, and to this end we provide possible topics for future research.
We examine how domestic political factors influence the type of regional integration arrangement (RIA) that states enter. States can pursue at least five types of RIA, in order of their depth of policy integration: preferential trade agreements, free trade areas, customs unions, common markets and economic unions. We argue that a country's regime type and the number of institutional ‘veto players’ strongly affect the type of arrangement that states choose. Democracies are more likely to form an RIA than other states, a tendency that becomes more pronounced as the proposed level of integration in an arrangement rises. However, all democracies are not the same. As the number of veto players rises, the likelihood of a democracy entering an RIA declines. Furthermore, veto players are expected to have a larger effect on the odds of a democracy forming an RIA, the greater is the extent of integration that the arrangement aims to achieve. A series of statistical tests, based on analysis of all pairs of countries from 1950 to 2000, support our arguments.
The flow of foreign direct investment into developing countries varies greatly across countries and over time. The political factors that affect these flows are not well understood. Focusing on the relationship between trade and investment, we argue that international trade agreements—GATT/WTO and preferential trade agreements (PTAs)—provide mechanisms for making commitments to foreign investors about the treatment of their assets, thus reassuring investors and increasing investment. These international commitments are more credible than domestic policy choices, because reneging on them is more costly. Statistical analyses for 122 developing countries from 1970 to 2000 support this argument. Developing countries that belong to the WTO and participate in more PTAs experience greater FDI inflows than otherwise, controlling for many factors including domestic policy preferences and taking into account possible endogeneity. Joining international trade agreements allows developing countries to attract more FDI and thus increase economic growth.
This article examines whether commercial openness has affected environmental policy in the postcommunist countries of Central and Eastern Europe and the Commonwealth of Independent States. During the Cold War, these countries had closed trade regimes combined with little environmental regulation and poor environmental quality. Since the fall of the Berlin Wall and the breakup of the Soviet Union, many postcommunist countries have engaged in extensive trade liberalization. Some countries, however, have been slower to open their markets, and others have maintained highly protectionist trade policies. Have countries that opened up to global markets improved their environmental policies, or has increasing exposure to the international trading system undermined efforts to improve environmental policy? The results indicate that trade openness undermined a key element of environmental policy in the region by reducing governments' ability to collect environmental taxes and support environmental investments.
Since the Second World War, preferential trading arrangements (PTAs) have become increasingly pervasive features of the international economic system. A great deal of research has addressed the economic consequences of these arrangements, but far less effort has been made to identify the political factors leading states to enter them. In this article, the domestic political factors affecting whether countries enter PTAs are investigated, placing particular emphasis on the number of veto players within a state. It is argued that the probability of forming a PTA declines as the number of such players rises. The results, covering 194 countries from 1950 to 1999, strongly support this argument. Holding various political and economic factors constant, increasing the number of veto players within a country significantly reduces the probability of signing a PTA.
What factors have promoted and retarded the spread of the Internet globally? The Internet is one example of the diffusion of technology. Much as other technologies, the Internet has diffused unevenly across countries, raising concerns over a “digital divide.” My main proposition is that its spread has been driven by neither technological nor economic factors alone. Rather, political factors exert a powerful influence. Groups that believe they will lose from the Internet use political institutions to enact policies that block the spread of the Internet. Some political institutions make this easier than others. Data from roughly 190 countries from 1991 to 2001 showthat a country's regime type matters greatly, even when controlling for other economic, technological, political, and sociological factors. Democratic governments facilitate the spread of the Internet relative to autocratic ones. Thus, the spread of democracy may help reduce the digital divide.