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Investment Policies in the GATT

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  • Rachel McCulloch

Abstract

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.

Suggested Citation

  • Rachel McCulloch, 1991. "Investment Policies in the GATT," NBER Working Papers 3672, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3672
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    1. Martin Richardson, 2017. "Content Protection with Foreign Capital," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 2, pages 19-39, World Scientific Publishing Co. Pte. Ltd..
    2. David Greenaway, 1990. "Trade Related Investment Measures: Political Economy Aspects and Issues for GATT," The World Economy, Wiley Blackwell, vol. 13(3), pages 367-385, September.
    3. 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.
    4. Stephen E. Guisinger, 1986. "Do Performance Requirements and Investment Incentives Work?," The World Economy, Wiley Blackwell, vol. 9(1), pages 79-96, March.
    5. 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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    1. Marc Bacchetta, 1997. "Les investissements directs dans l'O.M.C," Revue Française d'Économie, Programme National Persée, vol. 12(4), pages 71-93.
    2. Brooks, Douglas H. & Roland-Holst, David & Zhai, Fan, 2008. "Behavioral and empirical perspectives on FDI: International capital allocation across Asia," Journal of Asian Economics, Elsevier, vol. 19(1), pages 40-52, February.

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