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Increasingly, developing countries embrace foreign direct investment (FDI) andsimultaneously pursue economic integration with developed countries. Foreigninvestment is subject to sovereign risk and free trade agreements may serve as acommitment mechanism in order to achieve higher sustainable levels of FDI. Thispaper shows that such agreements, by inducing sunk investments in expandingexport sectors, can indeed increase the level of self-enforcing FDI. While onemight expect FDI from any source to increase, the analysis shows that this neednot be true for FDI originating in non-partner countries even though export-platform type FDI will rise. The reason is the offsetting effect from trade diversion,which diminishes the ability to retaliate should a host country renege on its ex antecommitment to a foreign investor. The choice of partner is thus crucial for acountry’s ability to attract FDI through economic integration.JEL classification: F15, F21, O19