Trade and Investment

The United States (US) Omnibus Trade and Competitiveness Act of 1988 authorize the President to prevent foreign acquisitions that threaten to impair the national security. The US-Canada Free Trade Agreement also illustrates the growing recognition of the close links between trade and investment. The threat of expropriation was a major deterrent to foreign investment in the developing countries prior to the 1980s. In order to encourage it, Japan’s Ministry of International Trade and Industry created an office for the promotion of foreign investment, as well as special financing facilities to provide foreign investors with loans at favorable rates. At the microeconomic level, the links between trade and investment are obvious. Despite the close links between trade and investment, there is a fundamental asymmetry in the way the two are treated internationally. Foreign trade and international investment are inextricably linked. Both are mechanisms by which nations optimize the use of their resources.