The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows

Edited by Karl P. Sauvant and Lisa E. Sachs

{Oxford University Press: 2009}

Summer 2009

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As the world’s economy continues to become increasingly interlinked, the treaties promoting international investment have adapted to encourage even more cross-border lending. This recent phenomenon is at the heart of a newly published book by Karl P. Sauvant and Lisa E. Sachs ’08 titled The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows.

In the book, Sauvant, the executive director of the Vale Columbia Center for Sustainable International Investment, and Sachs, the center’s program coordinator, assess the performance of bilateral investment treaties (BITs) and double taxation treaties (DTTs). In addition, the authors analyze the impact such treaties have on foreign direct investment (FDI). BITs are agreements between two countries for the reciprocal encouragement, promotion, and protection of foreign direct investment. DTTs forbid the countries signing the agreement from taxing income earned in another country for which taxes have already been paid. It would appear that these treaties have created a hospitable environment, thus contributing to the recent surge in FDI. However, Sauvant and Sachs claim that the actual effect of BITs and DTTs on FDI flows is debatable.

In their book, the authors discuss current trends in foreign direct investment while also examining economic data from countries that have signed such treaties in order to attract foreign investors.

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