Trade Liberalization, Competition and the WTO

Trade Liberalization, Competition and the WTO

Edited by Chris Milner and Robert Read

The prospective WTO Millennium Round of negotiations will highlight critical economic issues regarding the application and implementation of the WTO rules to international trade in goods and services. In this book, a distinguished group of academic experts considers the agenda and areas of interest for the next Round in light of Seattle, the functions of the WTO and competition policy issues arising from trade liberalization.

Chapter 7: New Rules for International Investment: The Case for a Multilateral Agreement on Investment (MAI) at the WTO

Alan M. Rugman

Subjects: economics and finance, international economics


7. New rules for international investment: the case for a multilateral agreement on investment (MAI) at the WTO1 Alan M. Rugman One of the emerging economic (and political) issues for the forthcoming WTO Millennium Round is the liberalization of investment. Today, multinational enterprises (MNEs) dominate world trade and investment. Over half of the world’s trade and over 80 per cent of the foreign direct investment (FDI) is undertaken by MNEs based in the G-8 countries, namely the USA, Japan and the large Western European countries (Rugman, 2000; UNCTAD, 2001). While tariffs and many non-tariff barriers to trade have been negotiated away in seven successive rounds of the GATT, the issue of investment liberalization on a multilateral basis has largely been ignored. Only in the NAFTA is investment a central part of a regional trade agreement. As a result, the investment provisions of NAFTA are argued to be a model for a multilateral agreement on investment (MAI).2 Unfortunately, the discussions to approve an MAI at the OECD between 1995 and 1998 ended in failure. Yet the design and adoption of a clear set of multilateral investment rules should be a priority for the WTO. The first half of this chapter presents a framework for an MAI at the WTO. The nature and content of the MAI is outlined and the difference between shallow and deep integration as well as the role of MNEs is explained. The experience with the MAI at the OECD is used to illustrate the...

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