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Commercial Policy and Foreign Ownership

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  • Jota Ishikawa
  • Yoichi Sugita
  • Laixun Zhao

Abstract

To serve the domestic market, foreign multinationals often not only export there but also control local firms through FDI. This paper examines the effects of trade and industrial policies on prices, outputs, profits, and welfare when exports and FDI coexist. Specifically, we focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross-border ownership on the basis of both financial interests and corporate control leads to horizontal market-linkages through which tariffs and production subsidies may harm a locally-owned firm but benefit a foreign firm. Foreign ownership regulation benefits a locally-owned firm.

Suggested Citation

  • Jota Ishikawa & Yoichi Sugita & Laixun Zhao, 2008. "Commercial Policy and Foreign Ownership," Global COE Hi-Stat Discussion Paper Series gd08-005, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd08-005
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    References listed on IDEAS

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    Cited by:

    1. Lee, Chien-Hui & Lee, Jen-Yao & Wang, Leonard F.S., 2021. "Foreign Ownership and Optimal Discriminatory Tariffs under Oligopolistic Competition," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(1), pages 97-114.
    2. Kuang-Cheng Andy Wang & Yi-Jie Wang & Wen-Jung Liang & Chao-Cheng Mai, 2017. "Optimal licensing with equity," Papers in Regional Science, Wiley Blackwell, vol. 96, pages 207-220, March.
    3. Hong-Ren Din & Kuang-Cheng Andy Wang & Wen-Jung Liang, 2016. "MFN vs Tariff Discrimination in the Presence of Cross Ownership," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1149-1166, November.

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    More about this item

    Keywords

    foreign direct investment; corporate control; tariffs; production subsidies; ownership regulation;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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