Recent data show that the institutional content of preferential trade agreements has evolved over time. Although pre-1990s preferential trade agreements focused primarily on tariff liberalization, recent agreements contain increasingly profound provisions in various areas, such as intellectual property rights, investment and standards. At the same time, the internationalization of production through foreign direct investment and outsourcing has increased significantly. This paper uses the Antr`s and Helpman (2008) model of contractual friction and global procurement to examine the depth of trade agreements affecting the international production organization. The paper establishes new measures of the depth of preferential trade agreements and vertical foreign direct investment to test the theory. Consistent with the model, the analysis shows that the depth of trade agreements is correlated with vertical foreign direct investment and is based on provisions that improve the contractual capacity of inputs supplied by suppliers, such as regulatory rules.B. Because this involvement of the model specific to so-called property rights? Multinational theory, the results provide empirical support for this approach compared to -?-vis alternative theories of the company`s borders. Division of Economic Research, WTO; Columbia Business School – Department of Economics; International Monetary Fund (IMF) World Trade Report 2014, “Trade and Development: Current Trends and the Role of the WTO.” 700 19th Street, N.W.Washington, DC 20431 USA . . “What limits African exports?” (with C.

Freund), World Bank Economic Review, No. 25 (3), pages 361-386, May 2011. World Trade Report 2010, “Natural Resources Trade. . World Trade Report 2012, “Trade and Public Policies: a Closer Look at Non-Tariff Measures in the 21st Century.” “Deep Integration and Production Networks: an Empirical Analysis” (with G. Orefice) The World Economy, Volume 37 (1), pages 106-136, January 2014. 420 West 118th StreetNew York, NY 10027 USA ENLACES BOGOT-REGI-N, “Oportunidades y Retos para el Aprovechamiento de los Acuerdos Comerciales.”