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Interactions Between Direct Investment and Trade in the Asia-Pacific Region

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  • Lee, Hiro
  • van der Mensbrugghe, Dominique

Abstract

The theoretical literature on trade and foreign direct investment (FDI) indicates that they could be either substitutes or complements. The empirical evidence on U.S.-Japan and APEC countries suggests that trade and FDI exhibit a complementary relationship. In this paper, we employ a six-region applied general equilibrium model that incorporates FDI to evaluate the impact of APEC trade and investment liberalization on output and the interplay between FDI and trade adjustments. The preliminary results suggest that FDI liberalization would bring about greater benefits to most of the APEC economies than trade liberalization. In the manufacturing sector, trade and FDI are found to be complements in the APEC regions.

Suggested Citation

  • Lee, Hiro & van der Mensbrugghe, Dominique, 2001. "Interactions Between Direct Investment and Trade in the Asia-Pacific Region," Conference papers 330945, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330945
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    References listed on IDEAS

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    1. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    2. van Meijl, Hans & Frank van Tongeren, 1999. "Endogenous International Technology Spillovers and Biased Technical Change in the GTAP Model," GTAP Technical Papers 318, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    3. Marcus Noland & Sherman Robinson & Zhi Wang, 1998. "The Global Economic Effects of the Japanese Crisis," Working Paper Series WP98-6, Peterson Institute for International Economics.
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