The impact of bilateral investment treaties (BITs) on collective labor rights in developing countries
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The impact of bilateral investment treaties (BITs) on collective labor rights in developing countries Fangjin Ye 1 # Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract Do bilateral investment treaties (BITs) affect collective labor rights in developing countries? BITs lock in pre-existing low labor standards that are attractive to vertical foreign direct investment, which represents a potential source of labor grievances and protests. Since foreign investors are likely to challenge labor unrest under stringent BITs, host governments are forced to take measures to undermine workers’ ability to engage in collective action in order to reduce the risk of labor unrest. We argue that governments may choose to undercut collective labor practices rather than laws, resulting in a worsening of labor practices and a larger gap between labor laws and practices. Evidence from 119 developing countries between 1985 and 2012 supports our hypotheses. Our results are robust to various measures of BITs, the inclusion of additional control variables, and different model specifications. Keywords Bilateral investment treaties . Foreign direct investment . Labor rights .
Developing countries
1 Introduction Bilateral investment treaties (BITs) have been the most visible and powerful legal protective mechanism underlying the growth of cross-border capital flows. According to the United Nations Conference on Trade and Development (UNCTAD), a total of 2911 BITs have been signed since 1959, and 186 countries are party to at least one such treaty. Since BITs were created to provide foreign investors with strong legal
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s11558-01909367-9) contains supplementary material, which is available to authorized users.
* Fangjin Ye [email protected]
1
School of Public Economics and Administration, Shanghai University of Finance and Economics (SUFE), 616 Phoenix Building, Wuchuan Rd 111, Shanghai 200435, China
F. Ye
protections and alleviate the time-inconsistency problem of foreign direct investment (FDI), the majority of the BIT literature examines whether signing those treaties increases FDI inflows into capital-hosting developing countries.1 It has largely overlooked the potential negative externalities of the “broad and asymmetrical” (Simmons 2014, p.12) investment protections on developing countries. We examine one potential negative externality – labor rights.2 Several recent studies have debated whether workers in developing countries benefit from economic globalization (Rudra 2005; Mosley and Uno 2007). While encouraging foreign investment inflows is considered to be critical to developing countries’ economic growth, the call for sustainable development has increasingly centered on the agenda of capital-hosting governments (UN 1992, 2002). Respect for fundamental workers’ rights is not only an economic issue; it also captures the important social pillar of sustainable development. All current major international sum
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