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Foreign direct investment, services trade negotiations and development: The case of tourism in the Caribbean

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Written by Dirk Willem te Velde

This article examines whether and how developing countries can use services trade negotiations to increase the amount of inward FDI conducive to development. It reviews how services trade rules can affect inward FDI, and employs panel data analysis with innovative use of instrumental variables in the tourism sectors of 9 Caribbean countries during 1997–2003. It argues that Caribbean countries may want to signal openness to inward FDI in GATS, while maintaining a degree of flexibility in the use of policy measures; in the current negotiations with the EU on Economic Partnership Agreements, the focus could be on emphasising the development dimension.

Dirk Willem te Velde and Swapna Nair