D2.2 Paper on the impact of BITs and trade policies on bilateral investment flows in the renewable energies and environmental industries

The focus of this study is the analysis of the determinants of the pattern of the bilateral FDI of China with the EU and other major trading partners, with a particular focus on the role played by investments and trade agreements. To this end we use an empirical model to test whether the existence of Bilateral Investment Treaties (BITs) may affect FDI; with respect to previous studies addressing similar issues, the effort here has been to investigate how different types of BITs may influence FDI. Indeed, BITs may vary significantly one with each other, depending upon the kind of provisions they include: their effectiveness in terms of FDI promotion could vary greatly. One of contribution of this study is to empirically capture the value added that certain provisions that might be included in the BIT may have in terms of enhancing FDI. This study provides in the next section some background to the analysis of the pattern of bilateral FDI with a review of the relevant theoretical and empirical literature. In the following section, the existing evidences about the pattern of China FDI are reviewed while the fourth reports the results of the analysis of the BITs of China performed within this project. Then, section 5 provides an explanation of the empirical model that has been used in this research; date and the main econometric issues are discussed in section 6 while section 7 comments on the results obtained from the estimations. The final section offers some concluding remarks.