Literature on FDI and trade has mainly concentrated on export-substituting or export-complementary nature of foreign direct investment (FDI). However, the relationship between FDI and trade has become far more complex in the current WTO regime wherein several developing countries have initiated import liberalisation and entered into trading arrangements. These have drastically reduced trading costs and encouraged trade. With the growing volumes of trade, the focus of policy makers in the developing countries has now shifted from whether FDI causes trade to whether trade can boost FDI inflows and in particular, what kinds of trade can boost FDI inflows?