The political economy of a bilateral investment treaty

Abstract

International political economy has been dominated by three theories about the relationship between the state and economic activity: economic liberalism, economic nationalism and Marxist economics. Economic liberalism has been associated with a fundamentally different international investment policy than economic nationalism and Marxist economics. This chapter describes each of these three theories of political economy and then identifies the essential distinction between liberal and illiberal investment policies. Bilateral investment treaties (BITs) present themselves as quintessentially liberal documents. Provisions comparable to those found in the BITs already have been included in a number of regional and sectoral agreements. In May 1995, the Organisation for Economic Co-operation and Development (OECD) decided to commence negotiation of a multilateral agreement on investment that would include many of the same provisions that have become typical of the BITs. A multilateral agreement on investment has much to commend it as an instrument of liberalism.