In addition to continuing efforts to liberalize policies toward FDI on the basis of national treatment, the United States should go further with other like-minded nations to establish the principle and implement the reality of “equal access”—equal participation by MNCs in host nation economies and technology systems. The United States can contribute to progress toward this goal through leadership in various international economic forums, and by avoiding policies that can be characterized as protectionist or discriminatory. The biggest contribution that Japan can make to the global economy and its own long-term prosperity is aggressive action to open its economy and increase the level of imports. Although Asian countries might enjoy a relatively large share of the benefits of such a Japanese market opening, U.S.-based MNCs, which are discouraged from investing in Japan because of higher costs and informal entry barriers greater than those that exist in other developed countries, would enjoy expanded opportunities as well. Now is precisely the wrong time for U.S. companies to “bypass Japan.”
As described in Chapter 3 , the United States and Japan historically have taken very different approaches toward foreign participation in their respective domestic economies. As noted in Chapter 2 , although national governments around the world are showing a general trend toward greater openness to FDI, individual countries continue to utilize a variety of approaches. The United States and Japan both have an enormous stake and significant responsibility for helping to manage a world economy that is increasingly integrated yet marked by continuing national differences in policies.
A number of multilateral and other agreements and forums are related to this effort. The recently concluded Uruguay Round Agreement of the GATF, which included provisions on trade-related investment measures (TRIMs) and established the new WTO, represents the continuing effort to liberalize world trade through a broad, multilateral approach. Although TRIMs were included, the agreement does not impose strong disciplines on host country governments in such areas as performance requirements.1
Among developed countries, the voluntary Code on the Liberalization of Capital Movements and the Declaration and Decisions on International Investment and Multinational Enterprises of the OECD remain the most prominent formal multilateral agreements concerning national policies toward FDI and MNC behavior.2 The OECD has studied the technology-related aspects of FDI and MNCs in recent years, but no concrete negotiations on extending OECD instruments to areas such as competition policy or R&D subsidies have emerged.
Some observers see a real need for negotiating a multilateral accord on direct investment. One approach envisions an initial “triad” agreement between the United States, Japan, and the European Union (EU) that would remain open to allow other countries to sign on after it is completed.3
Recently, significant initiatives involving FDI and MNCs have been undertaken regionally. The EU, for example, has already achieved substantial harmony on competition policy, and NAFTA involves significant trade and investment liberalization. ASEAN recently has taken steps to liberalize trade and investment further. Numerous bilateral agreements regulating FDI and the tax treatment of MNCs also exist. APEC endorsed liberalization of trade and investment within the region by the year 2020 in the November 1994 Bogor Declaration.
In the coming years the United States needs to continue working toward a more liberal trade and investment environment in the world economy. There is a great deal of debate concerning the relative merits of multilateral, regional, and bilateral approaches, with some asserting that