Trade, Investment and Development: Policy Coherence Matters

Abstract

The development process can advance more rapidly than ever before in the new global economy. While opening their economies to trade and investment is a necessary condition for developing countries to achieve sustained high growth and reduce poverty, it is by no means a sufficient condition. Initiating a sustainable dynamic growth requires sound, market-oriented economic policies; appropriate social policy frameworks, including strong investment in human capital and adequate social safety-nets; and good governance. But, as shown by the Asian financial crisis, weaknesses in any of these basic foundations make even successful developing economies vulnerable to crisis. OECD countries have a pivotal role to play in facilitating developing countries' efforts to fully exploit the benefits of open trade and investment. The key objective of this report is to identify how OECD countries can promote policy coherence by improving the framework for international investment and capital flows; addressing environmental concerns; facilitating participation of developing countries in the global information society; and enhancing the coherence of development co-operation policies. To be successful, policy coherence implies the broader agenda of consciously taking account of the needs and interests of developing countries in order for them to be effective rather than vulnerable and marginal players in the global economy.

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