Policy Competition for Foreign Direct Investment

Abstract

Fierce competition has arisen among developing as well as developed countries to attract increasing volumes of foreign direct investment (FDI). This new attitude in developing countries is part of the broad change towards market-friendly policies, as barriers and regulations are dismantled and intense competition for FDI is taking place at national as well as sub-national levels. This chapter addresses the global and regional dimensions of such competition. Section 7.1 addresses the main issues regarding policy competition for FDI. Section 7.2 describes the logic of the competition and the existing empirical evidence on its effects. Section 7.3 deals with the existing multilateral disciplines on investments. Section 7.4 considers the regional dimension of FDI policy competition, analyzing the cases of the European Union and Mercosur. Section 7.5 presents concluding remarks.

The authors are very grateful to Diana Tussie for her perceptive comments and suggestions on a previous draft and to Patricio Meiler, Jaime Campos and Ted Moran for their useful comments at LATN meetings. The usual caveat applies. Research assistance by Silvana Melitsko is gratefully acknowledged.