It is a neo-liberal theory promoted by Western governments to remove barriers to trade. Many Southern countries regard it as a way of perpetuating colonialism, whereby resources were exploited from the South in order to industrialise the North. The principle of free trade - unequal countries and economies competing equally, is unfair. The globalisation of production and the liberalisation of trade do offer opportunities, but also increasing risks of instability and marginalisation for those countries which are unable to seize these opportunities. According to UNDP, from 1980 to 1995 only 15 countries in the whole world achieved better living standards, economic growth and rising incomes, whilst economic decline or stagnation affected 110 countries.
Policies promoting free trade, however, remain unquestioned.
Japanese cars may have their components made in Vietnam, be assembled in the UK, and sold in Germany. However, increased FDI in itself is not the answer. The effect of uncontrolled investment can be just as negative as too little. Most FDI is via multinational companies, which are becoming increasingly powerful, and whose prime motive is profit for shareholders, often at any price. The core provision of the MAI is that foreign investors should receive the same treatment as national investment.