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Foreign Direct Investment as a Key Driver for Trade, Growth and Prosperity

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Foreign Direct Investment as a Key Driver for Trade, Growth and Prosperity

The Case for a Multilateral Agreement on Investment

World Economic Forum,

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A multilateral agreement on foreign direct investment would boost global economic growth.

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Editorial Rating

8

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  • Innovative

Recommendation

Trade and investment are adding to global prosperity, albeit in a patchy regulatory landscape. A number of barriers have stunted the growth of foreign direct investment (FDI), the flow of investment funds from one country to another for business assets such as factories and equipment. Public subsidies distort FDI inflows and outflows, while thousands of bilateral investment treaties and regional trade agreements create an incoherent, risky environment for sources of FDI. Past attempts to correct these deficiencies have failed, but this expert report from the World Economic Forum says the time may be right for a multilateral agreement on investment. Though its technical content may challenge readers unfamiliar with international trade regulation and its recent history, getAbstract recommends this authoritative report to anyone interested in the inconsistencies in international investment regulations and their consequences for global growth.

Summary

The Underdeveloped Potential of Foreign Direct Investment

Foreign direct investment (FDI) and trade, the “twin engines” of economic development, have increased substantially since the 1990s, propelling the growth of multinational corporations. But ineffective government policies have limited the scope of both trade and investment. Domestic protectionism has been creeping into public policies, and new efforts to liberalize trade agreements have been scarce. FDI has untapped capacity, but investors and governments confront “a confusing landscape” of practices varying from jurisdiction to jurisdiction, some rewarding FDI, others restraining it.

If foreign direct investment flowed more freely, it could become a powerful tool for increasing wealth and decreasing poverty in developing countries. A multilateral agreement on investment could help FDI achieve its promise as a source of economic vigor.

“Driving the World Economy”

Trade and investment boost global economic growth: The nominal productive output of the world today is three times greater than it was in 1980, merchandise trade is six times bigger and FDI has increased 20-fold. Multinational companies...

About the Author

The Global Agenda Council on Global Trade and FDI is a unit of the World Economic Forum.

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