Investment Wars: Contestation and Confusion in Debate About Investment Liberalization

Questions of investment governance are central to current trade wars. The USA complains of China’s use of restrictions on US investment as a lever to force technology transfer, while China complains of the review of investment in the USA on national security grounds. This article examines the place of these debates about investment liberalization within the trade wars. The focus is on US conduct, as the instigator of the trade wars. I argue that the USA is pursuing diverse and partially inconsistent in relation to investment liberalization. In some contexts, the USA is continuing to pursue the objective of removing impediments to outward investment, which was the principal objective of US investment policy for the decades prior to the Trump administration. In other contexts, the USA is seeking to encourage the repatriation of US outward investment and to regulate inward and outward investment according to ill-defined security rationales. I argue that prevailing materialist accounts of the trade wars struggle to explain these inconsistencies. Instead, I suggest that constructivist political economy provides a more promising explanatory framework. According to this view, inconsistency in policy objectives stems from foundational uncertainty about the nature of the ‘problem’ of investment liberalization.