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Investment Policies in the GATT

Listed author(s):
  • Rachel McCulloch

Host country policies toward inward direct investment can have predictable effects on trade flows. Trade related investment measures' (TRIMs) such as local-content requirements and minimum-export requirements have recently come under official scrutiny in the General Agreement on Tariffs and Trade. This paper examines the economic and political context of the Uruguay Round negotiations on TRIMs. In the negotiations, investment measures have been treated as a particular instance of a broader problem: the proliferation of nontariff trade distortions. As with other trade distortions, the negotiating strategy has been to identify specific policies to be proscribed or limited. However, this approach ignores the typical interactions between multinational firms and host governments. Observed investment regimes are often the result of a lengthy and complex bargaining process. While some investment regimes actually alter the allocation of resources in production and trade, others affect mainly the distribution of rents between firms and host countries. In particular, the trade impact, if any, depends as much on economic conditions as on the specific combination of investment measures imposed.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3672.

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Date of creation: Apr 1991
Publication status: published as The World Economy, Vol. 13 No. 4, pp. 541-533, December 1990.
Handle: RePEc:nbr:nberwo:3672
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  1. Richardson, Martin, 1993. "Content Protection with Foreign Capital," Oxford Economic Papers, Oxford University Press, vol. 45(1), pages 103-117, January.
  2. Theodore H. Moran & Charles S. Pearson, 1988. "Tread Carefully in the Field of TRIP Measures," The World Economy, Wiley Blackwell, vol. 11(1), pages 119-134, March.
  3. David Greenaway, 1990. "Trade Related Investment Measures: Political Economy Aspects and Issues for GATT," NBER Chapters,in: New Issues in the Uruguay Round, pages 367-385 National Bureau of Economic Research, Inc.
  4. Alan Rugman, 1980. "Internalization as a general theory of foreign direct investment: A re-appraisal of the literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(2), pages 365-379, June.
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