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 What We Are Striving To Accomplish

1. To see how trade and investment policies have historically been a subset
of domestic policies.
2. To see how global links in trade and investment have made policymakers
less able to focus solely on domestic issues.
3. To understand the challenges of international trade institutions.
4. To gain broad perspective on conflicts between emerging and
industrialized nations.
5. To examine policy responses to changing conditions, including import and
export restrictions.
6. To examine the positive and negative impacts of foreign direct investments
on both the host nation and the home nation.
7. To understand the purpose of investment policies, including investment
restrictions and promotion.

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 Trade and Investment Policies

Development
Employment
Standard of

Influence
Quality of

Foreign
National
Living
Life

Domestic Policy Foreign Policy

Regulate Direct Stimulate Protect

Government Policies
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 Post-War Global Trade Regulation

1947 - General Agreement on Tariffs and Trade (GATT)

• 144 members
• most -favored Nation (MFN)

1995 - World Trade Organization (WTO)

• General Agreement on Trade in Services (GATS)
• fast track authority

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 World Trade Organization

Agreements negotiated and signed by world’s trading nations -

providing legal ground rules for international commerce.

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 Changes in Global Policy
Environment

• Reduction of domestic policy influences.

icy
Pol
• Weakening of traditional international institutions.
• Conflict between industrialized and developing
nations.

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 Reduction of Domestic Policy
Influences

Effects of growing global influences

on domestic economies have been
significant.
It is difficult to isolate domestic
economic activity from international
market events.

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 Weakening International
Institutions
International
World Trade Monetary
Organization Fund
The WTO has its origins in GATT. The Designed to provide stability for the
creation of the WTO has greatly international monetary framework.
increased the scope of international
The original goal of the IMF was to
trade agreements.
provide for a fixed exchange rates
Its mission, the facilitation of between countries.
international trade and investment, while
ensuring that an effective forum exists
to afford a hearing and subsequent World Bank
achievements for concerns surrounding
the core.

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 Import Restrictions

• Along with well know methods of restricting trade such as Tariffs, Quotas, and
Non-tariff Barriers the following table provides a number of other methods.

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 Effects of Import Restrictions

• Huge domestic price impact to consumers

• Import composition change
• Efficiency
• Corporate response
• Shifting of activities to circumvent restrictions

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 Reasons for Export Restrictions

•National security
•Foreign policy
•Short supply
•Desire to retain capital

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 Investment Policies

Pros Cons
• Improved capital flows • Low levels of research and
development
• Technology transfer
• Risk of increased capital outflows
• Regional development
• Stifling of domestic competition and
• Increased competition,
entrepreneurship
benefiting economy
• Erosion of host culture
• Favorable balance of
payments • Disruption of domestic business
practices
• Increased employment
opportunities • Risk of interference by foreign
governments
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 Home-Country Perspective on
Investment Policies

Foreign direct investment:

•Facilitated by fiscal, financial, and nonfinancial incentives offered
by policymakers.
•Addition to GDP through profits, royalties and fees.
•Means to stimulate economic growth.
•Employment is negatively impacted in the home-country.
•Technological advantages may occur.

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 Strategic Considerations

• Keep in mind the U.S. economy has become intertwined

with world trade.
• Important to develop trade policies in a positive fashion
instead of a restrictive one.
• Hold “protectionist legislation at bay.
• A new perspective on government-business relations is a
key to enhanced competitiveness.

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