Mission Impossible? The Political Economy of Disciplines on Investment Incentives

Sauvé, Pierre and Marta Soprana (2018). ‘Mission Impossible? The Political Economy of Disciplines on Investment Incentives’, Journal of World Trade, Vol. 52, N. 2, pp. 1–20.


Investment incentives rank among the most important policy instruments governments employ to influence the locational and behavioural decisions of multinational firms. Following the recent increase in locational competition fuelled by the spread of global value chains (GVCs) and the growing impact of support measures for state-owned enterprises (SOEs), the need for enhanced disciplines on investment incentives has gained political and academic salience. This article explores the evolution of investment incentives from a development and rule-making perspective. Along with a summary of the existing literature, it examines current practices and recent trends in foreign direct investment (FDI) flows and the use of various investment incentives. This is followed by a discussion of the reasons for the observed stalemate in attempts at disciplinary rule-making. The article concludes by putting forth recommendations for data gathering and transparency that could further the move toward improved global governance founded on the increasing complementarities of trade, investment, and competition law and policy.