Regulation of Foreign Investment in Historical Perspective

Ha-Joon Chang

No 2003-12, UNU-INTECH Discussion Paper Series from United Nations University - INTECH

Abstract: Based on a historical survey of the experiences of the USA, the EU member states and the East Asian economies, the paper argues that during their early stages of development, now-developed countries systematically discriminated between domestic and foreign investors in their industrial policy. They have used a range of instruments to build up national industry. They included: limits on ownership; performance requirements on exports, technology transfer or local procurement; insistence on joint ventures with local firms; and barriers to 'brownfield investments' through mergers and acquisitions. On the basis of this, the paper argues that a multilateral investment agreement (MIA) at the WTO, founded on principle of national treatment, is likely to harm the developing countries' prospects for development. Our historical survey shows that, only when domestic industry has reached a certain level of sophistication, complexity, and competitiveness do the benefits of non-discrimination and liberalisation appear to outweigh the costs. As a result, countries generally move towards a greater degree of non-discrimination and liberalisation as they develop. In that sense, contrary to the claims of the demandeurs of the MIA non-discrimination is better seen as an outcome of development, not a cause

Keywords: Foreign Investment; Agreements; MIA; Economic History; Competitiveness; Developing Countries (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (4)

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