Trade policy


The 7 PFI questions on Trade Policy relate to:

  • Customs procedures

  • Trade policy uncertainty

  • International trade agreements

  • Reviews of trade policies

  • Trade restrictions on imported inputs

  • Home country trade policies

  • Export finance and risk mitigation

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Trade policies determine the size of markets for the output of firms and hence strongly influence both foreign and domestic investment. Over time, the influence of trade policies on the investment climate is growing. Changes in technology, liberalisation of host country policies towards trade and investment and the growing organisation of global production chains within multinational enterprises (MNEs) have all served to make trade policies in home and host countries alike a crucial ingredient in encouraging both foreign and domestic investment and in maximising the contribution of that investment to development.

This chapter does not prescribe trade policies but rather focuses on their efficiency in terms of implementation, predictability and transparency. The chapter also discusses the impact of restrictions on imported inputs of goods and services in a world of increasingly globalised production, the potential role of home country trade policies and the ways in which trade and hence investment might be facilitated through export finance and risk mitigation.

trade policy guidance


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