Investor Rights versus Human Rights: Do Bilateral Investment Treaties Tilt the Scale?

Abstract

This article argues that the broad and legally enforceable protection that bilateral investment treaties (BITs) offer to foreign investors worsens the human rights practices of developing countries. BITs lock in initial conditions attractive to investors that are linked to vertical investment flows and investment and trade competition. They also constrain the provision of welfare benefits or basic infrastructure. The lock-in and constraining effects are sources of popular grievance and dissent in states that host foreign investment. BIT-protected investor rights, however, limit the ability of governments to back-down vis-à-vis investors, lowering the relative cost of human rights violations. Finally, this study suggests that democratic regimes mitigate the negative effect of BITs. Evidence from 113 developing countries from 1981 to 2009 supports the hypotheses.

Labor upgrading and export market opportunities: Evidence from Vietnam

“…Other analyses suggest that foreign direct investment also could be a mechanism for rights‐related improvements, especially when multinational corporations avoid locating production in jurisdictions with questionable rights‐related records. If developing country governments are keen to attract FDI, due to its potential positive effects on wages, employment, and/or technological development, such a linkage might further incentivize upgrading (Barry et al 2013, Payton and Woo 2014; but also see Arel‐Bundock, 2017, Bodea & Ye, 2018, Garriga, 2016).…”

Investors versus Workers: A Class‐Based Critique of International Investment Treaties

“…In their empirical study on the impacts of BITs on human rights practices in developing countries, Cristina Bodea and Fangjin Ye find that BITs limit the capacity of developing countries to raise taxes and constrain the provision of welfare benefits, by locking in legally enforceable conditions that are attractive to investors and making it costly for host countries to reverse these conditions. 53 One implication of this is that the costs of social reproduction are externalised, as relatives and friends rush in to bear the brunt of social reproductive activities through free or precarious labour. Social reproductive work is still disproportionally carried out by women, in particular women of colour.…”