Policy Space in Trade and Investment Agreements

Since the global financial crisis, even the IMF has acknowledged that capital controls are a legitimate part of a country's toolkit to ensure economic stability. The United States and other major economies around the world have also realized that the financial stability of their trading partners is in their own interest. Despite this, capital controls stand in violation of the bilateral investment treaties and free trade agreements the US and the WTO have forged in the last two decades. This paper analyzes the flawed economic theory and history of these trade regimes, and offers a range of policy options more consistent with the realities of the 21st century...More