While trade and investment are (ever more) closely linked, particularly through
global value chains, it is worth pointing out some distinctions between
agreements on trade compared to the area of investment. First, the basic goal of
rules in the two areas differs.
Rules for trade originally aimed at smoothing flows
of goods by reducing protection at the border (thereby encouraging trade)
whereas arrangements for FDI are about protecting property rights of foreigners
within another country’s borders (thereby attracting investment). In practice,
things are more complex but the different origins still show in today’s debates.
Second, the degree of multilateralisation and institutionalisation is more
advanced for trade.
GATT and later the WTO have provided a relatively advanced multilateral
framework for trade relations and have reached broad membership and
coverage of global trade (by now 164 WTO members, with exchange among
them accounting for more than 94% of global merchandise trade and 97% for
The issue here has always been to reconcile bilateral and
plurilateral trade deals with(in) the multilateral system.
Trade agreements aim for privileged market access for the countries doing an
agreement. Yet for GATT/WTO most favoured nation (MFN), i.e. That countries
cannot discriminate between trading partners and that special favours granted
to one need to apply for all members, is a core principle. WTO provides for
exceptions from MFN for regional trade agreements provided that they meet the
conditions specified in GATT and GATS.
This is relevant for example for the
tariff part of negotiations as the rules stipulate that “substantially all of trade”
must be liberalised