This paper examines the complementarity between international trade and investment policies. A simple two country model demonstrates that export-platform FDI induces unilateral tariff liberalization by the FDI-source country, suggesting that international capital mobility may substitute partially for multilateral forums such as the WTO in achieving efficient tariffs. A multi-country extension of the model in which countries can compete for FDI via investment subsidies then develops an efficiency argument in favor of discriminatory tariff allowances such as GATT Article XXIV or Generalized Systems of Preferences. When small countries can earn preferential tariff treatment from a large trading counterpart by encouraging local export-platform FDI, the equilibrium aggregate FDI level will be higher and the tariff level lower when discriminatory tariffs are possible than when they are not.

Develops ideas and offers new approaches to the topic of trade theory.

This stimulating book provides a "one-stop centre" for a balanced coverage of the theoretical, empirical and policy issues linking globalization with foreign direct investment, regional economic integration, and economic growth and sustainable development.

Trade flows and trade policies need to be properly quantified to describe, compare, or follow the evolution of policies between sectors or countries or over time. This is essential to ensure that policy choices are made with an appropriate knowledge of the real conditions. This practical guide introduces the main techniques of trade and trade policy data analysis. It shows how to develop the main indexes used to analyze trade flows, tariff structures, and non-tariff measures. It presents the databases needed to construct these indexes as well as the challenges faced in collecting and processing these data, such as measurement errors or aggregation bias. Written by experts with practical experience in the field, A Practical Guide to Trade Policy Analysis has been developed to contribute to enhance developing countries' capacity to analyze and implement trade policy. It offers a hands-on introduction on how to estimate the distributional effects of trade policies on welfare, in particular on inequality and poverty. The guide is aimed at government experts engaged in trade negotiations, as well as students and researchers involved in trade-related study or research. An accompanying DVD contains data sets and program command files required for the exercises. Copublished by the WTO and the United Nations Conference on Trade and Development