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liberal documents, illustrated by their focus on investment security (Vandervelde 1998,
633).
Interestingly, despite the popularity of BITs in recent years, there is little evidence
that BITs increase investment flows.
A 1998 study by UNCTAD found a weak
correlation between BITs and investment flows, but subsequent studies which better
controled for the strong upsurge in FDI flows during the 1990s, found that BITs had little
if any impact (Halward-Driemeier 2003, 11; Walter 2002). It is generally agreed that the
primary function of a BIT, is as a “commitment device” to indicate a change in policy
towards a more liberal domestic economic environment, although BITs do not substitute
for adequate and professional domestic legal institutions (Halward-Driemeier 2003, 3,
22-23).
Flexibility for Development: The UNCTAD Challenge
The United Nations Commission on Trade and Development (UNCTAD) has
developed the concept of “flexibility for development” as a way to link the need to
protect investors’ rights with the need that developing countries have for policy space.
This idea, and the booklet which bears its name from the “Pink Series” of publications, is
the cornerstone of UNCTAD’s intellectual contribution to the debate on international
investment agreements, or IIAs (of which BITs are a sub-category) (Wilkie 2001, 142).
For our purposes, it is also the criteria on which US BITs can be compared with Latin
American-dyad BITs and which enables us to identify the substantive differences
between the two approaches.
Convention