Skip to main content
SpringerLink
Log in

Trade, Investment, and the Multilateral Trading System

  • Chapter
  • First Online:
20 Years of G20

  • 603 Accesses

Abstract

The world economy now trades not in final goods or services, but components, parts, tasks and activities and this variety of trade occurs not between countries but companies/firms, the majority of which are foreign affiliates of different multinationals. This increasing inseparability between trade in goods, services, and investment overtime or the so-called trade-services-investment nexus calls for a common set of norms that guide their trade volumes at the multilateral level, which is presently not existing. Recent attempts by some of the world’s largest trading countries to instigate protectionist policies seem to have furthered the extent of uncertainty involved in establishing a multilateral trading/investment system. To this end, the chapter emphasises on the role of bilateral/plurilateral or regional trade agreements, which have the WTO rules as their foundations, in (at least) paving a way towards multilateralism.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 119.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 159.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 159.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    As of 2016, trade in services constituted approximately 23% of total world trade. In fact, this share exceeded 30% in countries such as Singapore and even crossed 50% in some others such as Lebanon, Ireland, etc. (World Bank’s World Development Indicators (WDI) database).

  2. 2.

    The popular ‘Free Trade Doctrine’ is guided by the assumptions of perfectly competitive product/factor markets, small open economies and the theory of the first best (For details, refer any textbook on trade theories such as Batra (1973) or Bhagwati et al. (1998)).

  3. 3.

    This is because the very basis of international investment, particularly FDI, lies in the root of imperfect competition where one firm (the investor, in this case) has access to some specific asset (be it knowledge, managerial capability or some kind of specific machinery/equipment), which enables it to compete with the local firms in the host economy.

  4. 4.

    This is because these RTAs are negotiated between regional groupings that involve more than just one partner, and, higher the number of partners, more difficult it is to settle on a common platform as regards investment related negotiations.

  5. 5.

    See Chap. 8 of Pant and Srivastava (2015) for a survey of literature in this regard.

  6. 6.

    See Pant and Srivastava (op. cit.).

  7. 7.

    See for example, Goldar et al. (2017), Hoekman and Shephard (2017), Miroudot and Cadestin (op. cit.) amongst others.

  8. 8.

    This is because, unlike GATT, GATS is based on the positive list approach.

  9. 9.

    See Footnote 3 for explanation.

  10. 10.

    The BITs of the United States of America and Canada are exceptions to this category.

  11. 11.

    UNCTAD (2006).

  12. 12.

    Here, a direct reference can be made to the so-called natural trading partner hypothesis as explained by Wonnacott and Lutz in their 1989 study.

References

  • Batra, R. N. (1973). Studies in the pure theory of international trade. Berlin: Springer.

    Google Scholar 

  • Batra, R. N., & Casas, F. R. (1973). Intermediate products and the pure theory of international trade: A Neo-Hecksher-Ohlin framework. The American Economic Review, 63(3), 297–311.

    Google Scholar 

  • Batra, R. N., & Naqvi, N. (1989). Non-traded and intermediate goods and the theory of protection. European Economic Review, 33(4), 721–735.

    Article  Google Scholar 

  • Bhagwati, J. N., Panagariya, A., & Srinivasan, T. N. (1998). Lectures on international trade. Cambridge: MIT press.

    Google Scholar 

  • Bhasin, N., & Manocha, R. (2016). Do bilateral investment treaties promote FDI inflows? Evidence from India. Vikalpa, 41(4), 275–287.

    Article  Google Scholar 

  • Blonigen, B. A., & Davies, R. B. (2002). Do bilateral tax treaties promote foreign direct investment? No. w8834. National Bureau of Economic Research.

    Google Scholar 

  • Casas, F. R. (1972). The theory of intermediate products, technical change and growth. Journal of International Economics, 2(2), 189–200.

    Article  Google Scholar 

  • Crawford, J. A., & Kotschwar, B. (2018). Investment provisions in preferential trade agreements: Evolution and current trends. WTO Staff Working Paper No. ERSD-2018-14.

    Google Scholar 

  • Cusmano, L., Mancusi, M. L., & Morrison, A. (2010). Globalization of production and innovation: How outsourcing is reshaping an advanced manufacturing area. Regional Studies, 44(3), 235–252.

    Article  Google Scholar 

  • Dadush, U. (2015). WTO accessions and trade multilateralism. Cambridge: Cambridge University Press.

    Google Scholar 

  • Dymond, W. A. (1999). The MAI: A sad and melancholy tale. In F. O. Hampson, M. Hart, & M. Rudner (Eds.), Canada among nations. Oxford: Oxford University Press.

    Google Scholar 

  • Gereffi, G., & Lee, J. (2012). Why the world suddenly cares about global supply chains. Journal of supply chain management, 48(3), 24–32.

    Article  Google Scholar 

  • Goldar, B., Banga, R., & Banga, K. (2017). India policy forum. http://www.ncaer.org/Events/IPF-2017/IPF-2017-Goldar-Banga-Banga-Conf-version.pdf.

  • Hallward-Driemeier, M. (2003). Do bilateral investment treaties attract FDI?: Only a bit… and they could bite. Washington, DC: World Bank, Development Research Group, Investment Climate.

    Google Scholar 

  • Heckscher, E. F. (1919). The effect of foreign trade on the distribution of income.

    Google Scholar 

  • Henderson, D. (1999). The multilateral agreement on investment: A story and its lessons. Wellington: New Zealand Business Roundtable.

    Google Scholar 

  • Hoekman, B., & Shepherd, B. (2017). Services productivity, trade policy and manufacturing exports. The World Economy, 40(3), 499–516.

    Article  Google Scholar 

  • IMF BOPs.

    Google Scholar 

  • Lanz, R., & Maurer, A. (2015). Services and global value chains: Some evidence on servicification of manufacturing and services networks. WTO Staff Working Paper No. ERSD-2015-03.

    Google Scholar 

  • Mill, J. S. (1848). Principles of political economy with some of their applications to social philosophy, 1857 (pp. 467–474). Manchester: George Routledge and Sons.

    Google Scholar 

  • Miroudot, S., & Cadestin, C. (2017). Services in global value chains: From inputs to value-creating activities. OECD Trade Policy Papers, No. 197. Paris: OECD Publishing. http://dx.doi.org/10.1787/465f0d8b-en.

  • Moran, T. H. (2009). The United Nations and transnational corporations: A review and a perspective. Transnational Corporations, 18(2), 91–113.

    Article  Google Scholar 

  • National Board of Trade. (2013). Global value chains and developing countries an introduction. Sweden: Kommerskollegium.

    Google Scholar 

  • Neumayer, E., & Spess, L. (2005). Do bilateral investment treaties increase foreign direct investment to developing countries? World Development, 33(10), 1567–1585.

    Article  Google Scholar 

  • Nunnenkamp, P., & Pant, M. (2003). Why the case for a multilateral agreement on investment is weak. Kiel Discussion Papers 400. Kiel: Institute for World Economics.

    Google Scholar 

  • OECD. Stat. Organisation of Economic Cooperation and Development. Retrieved February 17, 2019, from https://stats.oecd.org/.

  • Ohlin, B. (1933). International and interregional trade. Cambridge, MA: Harvard Economic Studies.

    Google Scholar 

  • Pant, M., & Srivastava, D. (2015). FDI in India: History, policy and the Asian perspective. New Delhi: Orient BlackSwan.

    Google Scholar 

  • Read, P. (1999). International investment in the WTO: Prospects and challenges in the shadow of the MAI. www.bond.edu.au/law/blr/vol11-2/Read.doc.

  • Ricardo, D. (1921). The first six chapters of the principles of political economy and taxation of David Ricardo, 1817. New York: Macmillan.

    Google Scholar 

  • Samuelson, P. A. (1948). International trade and the equalisation of factor prices. The Economic Journal, 58(230), 163–184.

    Article  Google Scholar 

  • Sauve, P. (1998). Multilateral attempts at investment rule making: Why so difficult?. Mimeo: Harvard University.

    Google Scholar 

  • Sciarra, V. P. (1998). The world trade organisation: Services, investment and dispute resolution. International Lawyer, 32(3), 9–23.

    Google Scholar 

  • Smith, A. (1776). An inquiry into the wealth of nations (pp. 1–11). London: Strahan and Cadell.

    Google Scholar 

  • Taglioni, D., & Winkler, D. (2016). Making global value chains work for development. Washington, DC: The World Bank.

    Google Scholar 

  • Taussig, F. (1931). The tariff history of the United States. New York: GP Putnam’s Sons.

    Google Scholar 

  • Trade in Value Added (TiVA) database. Organisation of Economic Cooperation and Development. Retrieved November 7, 2017, from https://stats.oecd.org/index.aspx?queryid=75537.

  • UNCTAD. Investment policy hub. Retrieved February 16, 2019, from https://investmentpolicyhub.unctad.org/.

  • UNCTAD. Trade Analysis Information System (TRAINS). Retrieved February 16, 2019, from https://unctad.org/en/pages/ditc/trade-analysis/non-tariff-measures/ntms-trains.aspx.

  • UNCTAD. (1998a). Bilateral investment treaties in the mid-1990s. New York: United Nations.

    Google Scholar 

  • UNCTAD. (1998b). World investment report: Trends and determinants. New York: United Nations.

    Google Scholar 

  • UNCTAD. (1999). Lessons from the MAI. New York: United Nations.

    Google Scholar 

  • UNCTAD. (2006). Investment provisions in economic integration agreements. New York and Geneva: United Nations.

    Google Scholar 

  • UNCTAD. (2018). World investment report: Investment and new industrial policies. Geneva: United Nations.

    Google Scholar 

  • Vanek, J. (1968). The factor proportions theory: The n—factor case. Kyklos, 21(4), 749–756.

    Article  Google Scholar 

  • Voon, T., Mitchell, A., & Munro, J. (2014). Parting ways: the impact of mutual termination of investment treaties on investor rights. ICSID Review, 29(2), 451–473.

    Article  Google Scholar 

  • Wonnacott, P., & Lutz, M. (1989). Is there a case for free trade areas? Free Trade Areas and US Trade Policy, 59, 84.

    Google Scholar 

  • World development indicators. The World Bank. Retrieved February 15, 2019, from https://data.worldbank.org/data-catalog/world-development-indicators.

  • World Economic Forum. (2013). Foreign direct investment as a key driver for trade, growth and prosperity: The case for multilateral agreement on investment. Geneva: World Economic Forum.

    Google Scholar 

  • WTO OMC (2018). Report on G20 trade measures. Geneva.

    Google Scholar 

  • WTO RTA database. WTO. Retrieved November 9, 2017, from https://rtais.wto.org/UI/PublicMaintainRTAHome.aspx.

  • WTO. WTO-UNCTAD-ITC annual trade in services dataset. Retrieved February 16, 2019, from https://www.wto.org/english/res_e/statis_e/trade_datasets_e.htm.

  • Zhan, J. X. (2016). International investment rule-making: Trends, challenges and way forward. In K. Singh, & B. Ilge (Eds.), Rethinking bilateral investment treaties: Critical issues and policy choices (pp. 17–27). New Delhi: Both Ends, Madhyam, Centre for Research on Multinational Corporations.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Jawaharlal Nehru University, New Delhi, India

    Sugandha Huria

  2. Indian Institute of Foreign Trade, New Delhi, India

    Manoj Pant

Authors
  1. Sugandha Huria
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Manoj Pant
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Sugandha Huria .

Editor information

Editors and Affiliations

  1. Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India

    Rajat Kathuria

  2. Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India

    Prateek Kukreja

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Indian Council for Research on International Economic Relations (ICRIER)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Huria, S., Pant, M. (2019). Trade, Investment, and the Multilateral Trading System. In: Kathuria, R., Kukreja, P. (eds) 20 Years of G20. Springer, Singapore. https://doi.org/10.1007/978-981-13-8106-5_5

Download citation

Publish with us

Policies and ethics

Search

Navigation