International Investment Frameworks as a Tool for Regional Economic Integration

ABSTRACT

International investment frameworks (IIFs) have become a focal point of regional Economic Partnership Arrangements (EPAs). This is because the increasing importance of services (which cannot be stored or transported) in domestic production and international trade has shifted the focus of trade negotiations towards investment regulations. Furthermore, globalization encourages the attraction of FDI by means of efficient cross-border regulations as well as transparent improvements of a nation’s “competitiveness”.

The enlargement of the EU towards Central and Eastern Europe (CEE) offers an especially interesting case study for the impact of IIFs on regional economic integration. In the EU, the new member states adopted competitive foreign direct investment promotion policies while also accepting the EU’s investment framework and regional integration policies. Their experience shows that the implementation of a broadly defined regional investment framework seems to aid economic and institutional capacity building within the countries, while pushing towards de facto regional economic integration.