ABSTRACT
The Treaty of Rome made no mention of foreign direct investment (FDI), but the growth in FDI over the last three decades has been instrumental in the iterative development of two major European Community (EC) policy areas: trade policy and competition policy. The establishment of the EC itself involved a major conceptual change in the approaches to trade and competition policies for the signatories to the Treaty of Rome. Trade between the member states effectively became domestic or internal rather than external, requiring regulation through competition policy at the European level, rather than trade policy at the national level. These features distinguish European integration; in no other regional trade arrangement have sovereign states so comprehensively pooled their national interests or subjected themselves to a supranational authority to police their respect of the rules. Moreover, community activity in these policy areas has expanded in response to common pressures. Internally, these have included the need to resolve the policy tensions arising from the conflict between and among EC, national and regional interests. Externally, both policies have been shaped by the growing sense of global competition in trade and investment between the EC as a whole and countries such as the USA and Japan. Arguably nowhere are these pressures on EC policy-making more evident than in the policy challenges of FDI.
