The impact of bilateral investment treaties (BITs) on collective labor rights in developing countries

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.