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Trade, Investment, and the Multilateral Trading System

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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.

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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.

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Correspondence to Sugandha Huria .

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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

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