This confirms that
This confirms that
unilateral trade preferences granted by the EU may enhance EU FDI towards developing
countries while this is not the case for reciprocal liberalization; in the latter scenario,
investment diversion is expected to more than offset the investment creation effect of a PTA.
Conversely, EU FDI towards the second group of countries - which includes developed
countries as well as the few developing countries which do not have any PTA with the EU -
are not affected by the level of tariffs of host countries, while the coefficient of the EU tariffs
is significant, although the sign is not that expected based on theory.