As countries turn more to regionalism as a means of forwarding co-operation on trade rules and other
areas of policymaking, rules on investment are increasingly being incorporated into regional trade
agreements (RTAs). We analyse the economic consequences of including investment provisions in trade
agreements by creating an index of the extensiveness of investment provisions in RTAs and then using that
index in a gravity model framework of trade and investment. The results indicate that investment
provisions are positively associated with trade and, to an even greater extent, investment flows. Further, we
observe an insignificant effect of bilateral investment treaties on investment flows, suggesting either that
substantive investment provisions in RTAs impact trade and FDI flows more profoundly, or that the
combination of substantive investment rules and provisions liberalising other parts of the economy jointly
impact trade and investment more significantly. The report also includes case studies that confirm that the
relationship between investment and other provisions in trade agreements is complex and depends on many
factors.
