Is the EU Competition Framework a Model for International FDI Regimes?


The prior discussion of institutional policy choices for FDI governance led to the conclusion that reaching agreement on any of these options — even the most simple ones such as creating a more transparent and accountable system of subsidy controls — will not take place unless there is a sufficient balance of domestic interests and power capabilities as well as an appropriate regime design that ensures mutual trust and discourages opportunistic behavior. In that context, the EU framework does not only present itself as an effective mechanism of bounded FDI competition661 but also provides important lessons on the political-economic process for reaching consensus on the choice of FDI governance model. The final section will thus review the most important factors that contributed to the process and its outcomes, both in terms of overall guiding-principles of the institutional environment (“rules of the game”) as well as the more specific governance approach (“play of the game”) that informed the EU’s course. In conclusion, recommendations will be given as to whether or not the EU approach can serve as a model for the establishment of other FDI regimes.


European Economic Community Institutional Openness Bilateral Investment Treaty Investment Agreement Governance Dimension 
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  1. 661.
    FDI competition in the EU is really “bounded” in two ways: first, incentive support measures for large investment projects are confined to certain designated geographic (development) areas, and second, they are limited in terms of overall award rates by the Commission (see OMAN, 2000, p. 72)Google Scholar
  2. 663.
    It can be argued that the evolution of the EU framework and the shift of focus in subsidy control onto FDI competition were triggered by major external events such as capital market liberalization in the 1980s or the completion of the SEA in the 1990s, and, thus, not part of the original design as envisaged in the Treaty of Rome. See also YOUNG (1989) on the importance of external shocks on the success of regime formation.Google Scholar
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    UNCTAD (1999), p. 27.Google Scholar
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