This report describes the complex and changing interrelationship between trade, domestic investment and foreign direct investment (FDI) and provides examples of good practices in trade policymaking that create a healthy investment climate in developing countries. A two-by-two taxonomy is used to analyse the impact of policies affecting imports and exports in both host and home countries. After describing a typical investment project and its participants, the study identifies issues and practices that trade policymakers may wish to address to ensure that their trade policies attract investors and enhance the benefits of investment for development. The purpose of the document is to develop a framework for an operational and practical guide for trade policymakers. As such, it was circulated as a background document for the OECD Initiative on Investment for Development: A Policy Framework for Investment.