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Based on a novel approach to measuring the cost of trade in services for Modes 1 (cross-border supply), 2 (consumption abroad), and 4 (temporary movement of service suppliers), developed by the World Trade Organization Secretariat, this paper reviews available evidence on factors affecting trade costs for services supplied via a commercial presence in a host country market, so-called Mode 3 trade. It does so with a view to answering the question of whether the current "facilitation" agendas on services and investment proceeding at the World Trade Organization focus on the most important factors affecting Mode 3-related trade costs, by far the most important of all modes of supplying services internationally. The paper explores the policy opportunity costs arising from the decision to focus the investment facilitation agenda on matters of regulatory transparency and the streamlining of administrative procedures. It recalls how reducing regulatory heterogeneity, tackling discriminatory impediments to cross-border investment, and developing investor-state conflict management mechanisms to retain and expand investment and prevent dispute escalation - all issues left unaddressed by ongoing negotiations - hold important potential for reducing Mode 3 trade costs and facilitating expanded investment.

Cost of Trade --- Cross-Border Investment --- Dispute Resolution --- Foreign Direct Investment --- Investment Facilitation --- Services Trade --- Trade and Services --- Trade Facilitation --- Trade in Services --- World Trade Organization

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Evidence shows that foreign direct investment can provide many benefits to host countries, including productivity improvements, better jobs, and knowledge transfer. Further, it can serve as a vehicle for transformation of domestic production and better integration with global value chains. Nonetheless, these benefits are not automatic. Investment policies are required to maximize the potential gains of foreign direct investment. One challenge is that there are different kinds of foreign direct investment, and each may have different economic, social, and environmental impacts. However, the literature analyzing foreign direct investment often tends to swing from an extremely case-specific focus-analyzing experiences in one particular country in a single sector during a given period-to lumping together the analysis as if it was a homogenous phenomenon. Investment policy formulation requires a framework sophisticated enough to differentiate between the various kinds of foreign direct investment, as well as potential challenges and benefits for development. It must also be simple enough to enable governments to organize and prioritize the multiple and complex variables affecting the maximization of investment benefits. This paper presents an overview of the literature on the impact of foreign direct investment. The paper argues that a logical framework is needed to organize existing evidence from research to fill gaps in the literature and make existing evidence more useful in targeting policy making.

Debt markets --- Economic theory & research --- Emerging markets --- FDI and exports --- FDI impact --- Foreign direct investment --- Global value chains --- International economics & trade --- International investment agreements --- Investment & investment climate --- Investment incentives --- Investment policy --- Investment promotion --- Investor entry --- Investor protection --- Local content --- Macroeconomics and economic growth --- Private sector development --- Productivity --- Research and development --- Trade and investment --- Wages and jobs finance and financial sector development