Losing Control: Policy Space to Prevent and Mitigate Financial Crises in Trade and Investment Agreements

Abstract

This article examines the extent to which measures to mitigate the current financial crisis and prevent future crises are permissible under a variety of bilateral, regional and multilateral trade and investment agreements. US trade and investment agreements, and, to a lesser extent, the World Trade Organization, leave little room to manoeuvre with capital controls, despite increasing evidence that certain controls can prevent or mitigate crises. Investment rules under the treaties of most capital‐exporting nations allow for at least the use of temporary controls as a safeguard measure. The article offers a range of policies that could be deployed to improve US investment rules.