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This paper studies the formation and management of an international entity for promoting the provision of global public goods in a setup of international treaties on concessions and reservations. Based on the so-called Vienna Convention by which there can be a discrepancy between the original treaty obligation and the ratified one in the multi-lateral treaty implementation, we construct two-stage mechanisms for international treaties on global public goods; the concession stage and the ratification stage with reservations. We explicitly analyze the optimal reservation levels from the optimal mechanism when the countries face asymmetric information on the preference parameters to global public goods. Specifically, we characterize the environments where the optimal mechanism with dominant-strategy incentive-compatibility and ex-post participation- constraint in the literature of mechanism design exists. The result shows that the sophisticatedly calculated transfers in the principal of quid pro quo control the international concessions and reservations.

The Korea-China-Japan Investment Promotion, Facilitation and Protection Agreement is the first treaty in the economic field that binds the three Northeast Asian countries together under a single legal instrument. The existence of effective dispute-settlement procedures under the treaty will contribute to the creation of a favourable investment climate in the host country. Nevertheless, there have been fears about frivolous or vexatious claims that could inhibit legitimate regulatory actions by governments. How to compose an investment chapter of the Korea-China-Japan FTA that is being negotiated is a pressing demand for all in the region. Any pertinent answers to such a quest require a thorough comparison of the benefits and drawbacks of any development of relevant rules and governance. In the end, a quest for better international investment governance in Northeast Asia in the future requires sound evaluation of lessons from the past and present.