The impact of trade-related investment measures in developing countries

As foreign direct investment (FDI) has grown rapidly with world integration, numerous new challenges have confronted the global trading system. Both developed and developing countries have attempted to reach bilateral and multilateral investment agreements, but, instead, disputes between multinational enterprises (MNEs) and host countries have increased with FDI. This dissertation assesses the potential for Trade Related Investment Measures (TRIMs) to create better investment conditions for all countries in this new environment. The first essay gives context and rationale for this assessment by providing background information, relevant definitions, a description of the theoretical framework for analysis of TRIMs agreements, and the historical development and controversies of these TRIMs agreements from the WTO Uruguay Round to the Doha meeting in 2001. The second essay employs a dynamic general equilibrium model to examine the theoretical impacts of two types of TRIMS policy instruments, local content requirements (LCRs) and government investment incentives (GIIs). The final essay modifies a computable general equilibrium (CGE) model to specifically quantify the impacts of strengthening taxes and GIIs on the small open economy of Tunisia. The results of these analyses imply that LCRs should restrict long-term development and growth of host country economies while GIIs to MNEs should stimulate host country R&D research and promote technology transfer. Therefore, international cooperation should be encouraged so that LCRs and other such long-term welfare reducing TRIMS might be eliminated and so that GIIs and other such TRIMS might enhance long-term welfare in the countries of both trading partners.