Recommendations for Strategy: Policy Coherence in Tax, Trade and Investment

By Irma Mosquera, Julien Chaisse, and George Dimitropoulos   

The initial draft of these recommendations was discussed during the Lorentzcenter workshop mentioned below. The authors of this blogpost acknowledge the contribution and input of the workshop participants.


In June 2023, we organized a 5 day-workshop on Redefining Global Governance in the EU and Beyond: A tax, trade and investment perspective with funding from the NIAS-Lorentz Center Program, the ERC Research Project GLOBTAXGOV that investigates Global Tax Governance and the Jean Monnet Chair on EU Tax Governance (EUTAXGOV). In this workshop, more than 20 scholars from the disciplines of tax, trade, and investment gathered to debate global governance, to discuss lessons to be learned across the three fields with a view to improving them – as well as their interaction, and to study the role different actors – such as IOs, the EU, individual countries, etc. – play in global governance across these three areas.

In the workshop, in which scholars from developed and developing countries participated, we sought to identify the challenges that developing countries face in ensuring effective representation of their voices and interests in international organizations and to draw lessons from tax governance for investment and trade governance. This is very topical considering the Resolution of November 2, 2023 for a  United Nations framework convention on international tax cooperation to strengthen international tax cooperation and make it fully inclusive and more effective. This Resolution has been already addressed in a roundtable that took place in November 2023 (recording available here).

What has been done on tax, trade and investment so far?

The interaction between tax, trade, and investment is not a new topic, and GLOBTAXGOV has contributed to this discussion by addressing the need to exchange best practices among these areas and ensure policy coherence at international fora such as at the World Trade Organization (WTO), United Nations Conference on Trade and Development (UNCTAD), and the United Nations Commission on International Trade Law (UNCITRAL), as well as in international tax organizations (OECD, UN), supranational organizations (EU), and other regional organizations in Africa, Asia, and Latin America.

The WTO agreements are inherently tax-related international agreements. One of the first – and most important – cases of the WTO Appellate Body is also tax-related. Article III:2 of the General Agreement on Tariffs and Trade (GATT) regulates internal taxation of foreign products. The article allows almost no deviation in the treatment of foreign products compared to national “like” and “directly competitive or substitutable” (DCS) products. The same applies by reference in Article I to foreign products from any third country. Article III is much less lenient to domestic legislators and regulators when they regulate tax matters compared to any other regulatory matter. The General Agreement on Trade in Services (GATS) makes several references to tax-related matters, as well as the international regulation of taxation outside the WTO framework.   

The introduction of the Base Erosion and Profit Shifting Project and its Multilateral Convention has been seen by some countries as a model to be adopted by other organizations in order to achieve a more effective international agreement and to solve the problems of legitimacy in international negotiations.[1] However, the aforementioned 2023 UN Resolution shows that there are still challenges in achieving a more inclusive and effective international tax cooperation framework. These challenges should also be addressed in trade and investment negotiations.

The relationship between tax, trade and investment is also relevant in the OECD discussions regarding the taxation of highly digitalized business (Pillar 1) and the introduction of the Global Minimum Tax (Pillar 2). Furthermore, the introduction of the EU Standard of Tax Governance in the recently negotiated EU-ACP Post-Cotonou Agreement and other EU partnership/trade agreements shows that the tax, trade and investment nexus should be taken into account by policymakers in all areas and across continents.

Amidst the ongoing discourse on the relationship between tax, trade, and investment law, scholarly contributions have been crucial. The series of articles published in the Symposium “The Future of International Tax Disputes” in the Asia Pacific Law Review 2023 as well as further works (for example, Investor-State Arbitration in International Tax Dispute Resolution: A Cut Above Dedicated Tax Dispute Resolution?, The Undertaxed Profits Rule (UTPR): Potential Conflicts with International Law? have significantly enriched the understanding of these complex legal interconnections.[2]

To address the challenges and improve the connections, the United Nations Committee of Experts on International Cooperation in Tax Matters created a Subcommittee on the Relationship of Tax, Trade, and Investment Agreements. However, in the most recent document of this Subcommittee (October 2023), the topics discussed are limited to the relationship between (i) tax and investment agreements, (ii) the options for improving guidance on the interaction of tax treaties with the WTO General Agreement on Trade in Services (GATS), and (iii) Other Issues in Trade Agreements or Mixed Trade and Investment Agreements. The focus of this subcommittee is on the first topic; mainly on the number of international investment agreements and their impact on taxation which results in an increasing number of arbitration cases, as well as on the varying approaches to the treatment of taxation in international investment agreements.

These issues have also been addressed in the 5 day-workshop co-organized by GLOBTAXGOV on Globalization and Digitalization: Interconnections between Taxation, Trade, and Investment in 2021 (recording and program available here) and the articles of the special issue The Future of International Tax Disputes available here).

Why do we need to do more? – and the contribution of the workshop

The above-mentioned developments have not considered what lessons have been learned on the way global governance has been dealt with in international tax initiatives (for example, BEPS Project, Pillar 1 and Pillar 2) vis-à-vis trade and investment initiatives. Awareness of the interlinkages is crucial since some of the current proposals in international taxation (Pillar 1, Pillar 2) are raising controversial issues – for example, instead of Pillar 1, the introduction of a digital service tax that can result in another version of the “trade wars”, as well as the redefinition of tax incentives in light of Pillar 2 proposals.

Furthermore, little attention has been given by government officials in developing countries to the need for policy coherence between tax, trade, and investment to achieve the 2030 Sustainable Development Agenda – including the need to enhance global partnership for Sustainable Development, and beyond. The EU and its member countries have committed to policy coherence for development (PCD) with the aim of determining the impact of EU policies on development objectives and increasing the effectiveness of development cooperation. This has resulted in the 2019 EU Report on Policy Coherence for Development. In addition, some EU member countries have developed their own work on policy coherence (for example, the Netherlands and Belgium). Developing countries themselves have not addressed the topic of policy coherence.

In light of the imperative to connect trade and investment measures with taxation strategies, a holistic approach has to be considered. This does not only encompass the economic dimensions but also the socio-political, socio-economic and environmental aspects of the relevant policies. Our research underscores the need for policies that balance these multifaceted objectives, ensuring that tax, trade, and investment policies are not developed in silos but rather in a cohesive, integrated manner. Such an approach can significantly enhance the effectiveness and fairness of international economic policy-making, particularly in an increasingly interconnected global economy.

To better understand how global governance in tax, trade, and investment can be analyzed and to learn from each other for improved policy coherence, the workshop brought together scholars from diverse geographies, academic perspectives, and disciplinary backgrounds.

In addition to a book (forthcoming in 2024) featuring contributions of some of the workshop participants, another output of this workshop was the elaboration of some recommendations for policy makers to work towards tax, trade, and investment policy coherence. These recommendations were discussed and proposed by the participants in the June 2023 workshop, which aims to provide guidelines for policymakers in tax, trade, and investment can take into account to understand the interlinkages between these three areas.

Recommendations for Strategic and Enhanced Policy Alignment in Tax, Trade and Investment

It is essential for policymakers to adopt a holistic e approach with a view to better coordinating tax treaties with trade and investment policies. Recognizing the dynamic interplay between these areas, we advocate for policies that not only promote economic growth but also address broader concerns such as environmental sustainability and social justice. Such a comprehensive strategy ensures that economic policies are not only profitable but also equitable and responsible, fostering a more inclusive and sustainable global economic framework.

1. Procedural Coherence in Policy Formulation:

In the quest for policy coherence in the realms of tax, trade, and investment, procedural coherence is essential. This approach emphasizes the active and collaborative engagement among national governments and diverse stakeholders. In fact, by fostering a platform for inclusive dialogue and shared insights, it aims to effectively align policies across these intertwined sectors. A concerted effort is key to preemptively address potential conflicts and ensure that policies across these domains are not only aligned but also mutually reinforcing.


  • Active engagement between national governments and various stakeholders.
  • Inter-ministerial coordination (e.g., Ministry of Foreign Affairs, Ministry of Trade and/or Investment, and Ministry of Finance).
  • Regular information sharing among tax authorities, Ministries of Finance, Foreign Affairs, Trade, and Investment.
  • Impact assessments of international agreements in trade, tax, and investment.

2. Substantive Policy Reforms to Avoid Negative Interactions:

Substantive policy reforms are important in mitigating negative interactions between tax, trade, and investment which helps to work towards a cohesive policy framework. Development strategies are to be designed in a way that not only fuels economic growth but also conscientiously integrates environmental sustainability and social justice; the goal should be to shape policies that transcend mere profitability, aiming instead for equitable and responsible economic strategies. This will build economic frameworks that are not only inclusive but also sustainable – addressing the critical interplays and dependencies across sectors.


  • Strategies to coordinate policies in a way that promotes economic growth, environmental sustainability, and social justice.
  • Awareness of the impact of international and regional trade law on the sovereign power to tax.
  • Inclusion of complete tax carve-out clauses in Bilateral Investment Agreements, and other International Investment Agreements.
  • Avoidance of stabilization clauses regarding tax matters.
  • Awareness of the high cost of investment arbitration.
  • Attention to non-market values sustaining tax, trade, and investment initiatives.

3. Awareness of External Impacts on Policies

Policymakers must refine their understanding of the dynamics between tax, trade, and investment policies. For instance, high corporate taxes can drive businesses to relocate internationally – negatively impacting the original country’s trade balance and employment. Similarly, investment policies like tax holidays, while attracting foreign investment, can lead to a substantial loss of tax revenue, affecting public finances. Trade agreements also have ripple effects, as lower tariffs may result in a flood of imports, adversely impacting local industries and redirecting investments. Such scenarios underscore the importance of a comprehensive approach in policy-making to avoid unintended negative impacts across different domains.


  • Inter-ministerial coordination (e.g Ministry of Foreign Affairs, Ministry of Trade, and/or Investment, and Ministry of Finance).
  • Awareness of the impact of international and regional trade law on the sovereign power to tax.
  • Inclusion of complete tax carve out clauses in Bilateral Investment Agreements, and other International Investment Agreements.
  • Avoid the inclusion of stabilization clauses regarding tax matters. 
  • Awareness of the high cost of investment arbitration.
  • Impact assessments of international agreements in trade, tax and investment
  • Assessment of externalities of agreements in other policy areas (tax, trade, and investment). 

4. Global Imbalance of Power in Policy Formation 

In addressing global imbalances, it is critical to emphasize equitable participation in international economic policy-making. This means ensuring that developing countries have a meaningful voice in negotiations, thereby addressing systemic disparities. Our analysis highlights the importance of such inclusive dialogue in crafting policies that are fair and effective globally. This perspective is particularly pertinent following the discussion of the 2023 UN Resolution, which underscores the need for a more balanced global economic governance system.


  • Fora creation at regional (and within the region) and international level.
  • Reimagine the existing operation of international cooperation initiatives in tax, trade, and investment to make it more inclusive. 
  • Awareness of interlinkages in international negotiations at international fora such as the UN, the WTO, UNCTAD, UNCITRAL, and the OECD, among others.

The path to policy coherence in tax, trade, and investment is multi-faceted, requiring both procedural and substantive reforms. It is essential to engage stakeholders actively, coordinate across ministries and agencies, and understand the – negative and positive – external impacts of policies. Importantly, GLOBTAXGOV, EUTAXGOV, and all associated experts remain committed to furthering this work, emphasizing equitable global participation and addressing the intricate interconnections among these fields. This ongoing commitment is pivotal for advancing a more inclusive, sustainable, and effectively governed international economic system.

[1] For instance, see in trade the 2019 discussion at the WTO Public Forum that addresses the   lessons for the WTO from the international corporate tax reform process See in investment the 2019 Submission by Colombia to the UNCITRAL Working Group III (Investor-State Dispute Settlement Reform) to take other experiences such as in tax the OECD Base Erosion and Profit Project and its Multilateral Convention could be a plausible procedural approach to follow, in order to move forward and to implement with flexibility and progressivity the measures that address the concerns already identified by the Working Group Submission available here. See also the discussion Tax Governance: A model to reform IIAs available here.

[2] See, for example, Frederik Heitmüller and Irma Mosquera, Special Economic Zones Facing the Challenges of International Taxation: BEPS Action 5, EU Code of Conduct, and the Future, Journal of International Economic Law, Volume 24, Issue 2, June 2021, Pages 473–490, and Special Issue on ‘Special Economic Zones in International Economic Law: Towards Unilateral Economic Law, eds. Julien Chaisse and Georgios Dimitropoulos. Journal of International Economic Law, Volume 24, Issue 2, June 2021, Pages 229–257,

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