(a) Trade Treaties Can Mitigate Armed Conflicts
From a historical perspective, one of the reasons why the armed conflict occurred was the reluctance of countries to undertake trade co-operation. Specifically, the existence of trade coalition, which deliberately imposed protectionist policy, exacerbated the conflict. A study from Gowa and Hicks indicated that the trade blocs during World War I and the Great Depression triggered high political tension among countries, leading to World War II. Learning from this experience, a country that apply trade openness instead of trade blocs will have a greater opportunity to forestall and resolve conflict within their borders.
In the modern era, the existence of trade treaties is important to reach world peace and stability. When governments concluded treaties, it was not only to reach economic prosperity but also security. For instance, one of the objectives of the Association of Southeast Asian Nations (‘ASEAN’) 1967 is to ‘promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter’. Besides, CETA recognises ‘the importance of international security, democracy, human rights and the rule of law for the development of international trade and economic cooperation’. Moreover, the establishment of GATT 1947, to some extent, also influenced by non-economic objective, in particular to prevent further conflicts.
Trade treaties can mitigate the armed conflict although this issue is not always expressly stated in treaties’ objectives. Having actively engaged in the bilateral trade relations, thereby reducing t...
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... significant in redirecting FDI flows when the host countries are less developed or investors perceived host countries as high-risk countries.
Although some studies showed how investment treaties increased FDI inflows, other studies presented criticism, stating the existing treaties have no any significant benefits for FDI. Sornarajah argued that political stability and other factors have a greater influence on investment flows than treaties. Besides OECD through an analysis of twenty years of bilateral FDI flows to developing countries found little evidence that BITs have triggered additional investments, especially for countries with weak domestic institutions, including protection of property. Equally important, tax treaties can discourage FDI as they can be used not only to minimise tax evasion, but also to simplify tax filings and avoid double taxation.
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