Need for implementation of Multilateral agreement on Investment vis-à-vis Dispute Settlement in WTO

– By Aayushi Singh*

Introduction – Cogs of the same wheel – Trade and FDI

From where do we get the much-assumed co-relation between trade and Foreign Direct Investment (FDI)?  Let us draw from the theory of Grazia Ietto-Gillies who opined that the reason for the growth of FDI and MNCs were rooted in neoclassical economics based on macro-economic principles.[1] These theories were based on the classical theory of trade in which the motive behind the trade was a result of the difference in the costs of production of goods between two countries, focusing on the low cost of production as a motive for a firm’s foreign activity.[2] The relation between trade and FDI flows from this. Analytical work has recently been developed by OECD in order to explore the nature of these links in quantitative terms.[3]