Although international investment continues to influence growth in the global economy than trade, it has developed without the necessary presence of a formulated international system of rules according to Aaronson (2004). In fact, policymaking in this field has been without success. This is for example due to reasons of disagreement or a requirement for certain demands in areas like agriculture between the developed and the developing nations, such as happened in 2003 in Mexico during the fifth ministerial of the World Trade Organization. Bilateral Investment Treaties are what govern investment in the current world. The framework provides a limit to and compensation in cases of expropriation, seeks to ensure fair and equitable treatment of private foreign investment, and leveling the ground for domestic as well as foreign investments. They also provide for the settling of disputes between or among states and investors. Other frameworks put consideration for the formation of multilateral agreements or formulation of negotiations between investment partners. The Bilateral Investment framework, unlike the two aforementioned, allows that each of the countries freely protects certain sectors of the local economies. They do not allow the obligation to consider other countries’ preferences as the other two frameworks.
Countries may form an agreement framework between them in an attempt to expand trade between them and/or resolve underlying disputes. This may offer other advantages such as preferential treatment amongst them in the face of other competing countries since fields of trade and investment interests may differ between them. In addition, negotiations provide certain preferential treatment and understanding in times of dispute. To arrive at these agreements, business negotiations may be one step to establish and have a fair deal for each member country. These can be termed as business negotiations. Since the outcomes may be more costly and even unexpected, it is important that member countries prepare, plan and even negotiate more carefully. Such negotiations are voluntary, and countries must understand the need for understanding and flexibility.
According to Ghauri, the international business negotiation framework would involve background factors, process, and atmosphere as the three variables. The background factors aforementioned will entail the end results that the participants to these negotiations which to achieve; the environmental factors of social, economic, and political settings of the member countries; a market position which may dictate the options available to the negotiators and; third parties. In most cases, international business negotiations will involve the last factor. The most important thing to note is that the process of negotiation may be more complex as member countries want to get the best, and at the same time pulled by the forces wanting them to establish business relations. Understanding of how the governments may influence performance and business strategies may be acquired through an understanding of frameworks pertaining development of trade and investment policies which are issue-area analysis, sovereignty-at-bay, dependency model, and political risk (Balaji, Prescott, & Ravindranath, 1999).
In order to establish good international investments, it is important that the country is involved in understanding the framework of policy formulation and development in the country, even before as it negotiates for trade between the two. In addition, multinational enterprises need to understand the trade policy in the given country. This makes the formulation of tight business agreements between the two countries even more difficult, since, along the way, negotiators may discover the hidden barriers. A legal framework may be harder to develop to ensure that no breach of the agreements is made because agreements are developed through a voluntary process and any member can easily walk away. The negotiating countries need to understand the existing relationship of the partners-to-be with other trading partners and so scrutinize the evolution of trade policies based on these competition relationships. Where international firms seek to exploit business opportunities in host countries as a result of agreements, they need to understand trade-offs through the trade policies, and the investment policies and their impacts. In the face of global competition, there is no perfect level playing ground between the developing and developed countries. This means that all countries cannot use similar approaches to international trading. Third world countries for example continue to see preferential treatment by their developed counterparts as essential for trading and thus may be pulled to forming agreements that may not be their choice. In addition, most, or at least some developed countries like China would wish that one day the U.S preferential treatment of some African countries’ products in areas like textile goods through Agoa will come to an end. Countries may need to choose the best alternatives to doing business and trading with partners so as to reap the maximum benefits including shielding themselves from an international competition that is being advanced today through global integration.
References
Aaronson Ariel Susan. International investment carousel: when it comes to rules for international investment, its time to stop riding the WTO. International Economy, The, Wntr. 2004. Web.
Balaji R. Koka, John E. Prescott, Ravindranath Madhavan. Contagion Influence on Trade and Investment Policy: A Network Perspective. Journal of International Business Studies. Vol. 30, 1999.
Ghauri N. Pervez and Jean-Claude Usunier. (2003). International Business Negotiations. 2 Ed. Llustrated. Emerald Group Publishing