As investment and trade are inextricably linked in GVCs, it is crucial to ensure coherence between investment and trade policies. Avoiding inconsistent approaches requires paying close attention to those policy instruments that may simultaneously affect investment and trade in GVCs.
The current international investment regime does not adequately reflect the interconnected nature of economies in GVCs. Increased multilateral co-operation and co-ordination are important to maintain the open and predictable international investment climate that has supported international investment in GVCs to date. In the meantime, policymakers need to be aware of potential interactions and overlaps between international investment and trade law V) Ensuring coherence between trade and investment policies with a view to promoting policy synergies and avoiding inconsistencies.
Regional trade and investment agreements are particularly relevant from a value chain perspective, as regional liberalization efforts are shaping regional value chains and the distribution of value added. Many value chains are more regional in nature than global, and most value chain hubs thrive only with strong regional supply bases. Regional chains are strong especially in Europe, North America and East and South-East Asia, but weaker in Latin America and in Africa (Figure 22). The relevance of regional value chains shows the potential for using trade and investment V) Ensuring coherence between trade and investment policies agreements in broader cooperative efforts for regional industrial development. Such efforts could focus on liberalization and facilitation of trade and investment and establish joint investment promotion mechanisms and institutions. They could extend to other policy areas important for enabling GVC development, such as the harmonization of regulatory standards and convergence of standards on environmental, social and governance issues. And they could aim to create cross-border industrial clusters through joint investments in GVC-enabling infrastructure and productive capacity building.
Figure 22. Share of intraregional GVC flows in total GVC participation, major regions, 2010
Source: UNCTAD, World Investment Report 2013 – GVCs: Investment and Trade V) Ensuring coherence between trade and investment policies for Development.