Spoilt for Choice? Multinational Corporations and the Geography of International Production

This paper questions the view that foreign direct investment (FDI) is producing an integrated world production and trading system. Although multinational firms have a greater choice of locations than in the past, their recent investments abroad have taken place within a regional, rather than global, framework. The upsurge of FDI flows from North to South has been attracted by just a handful of fast-growing developing countries. The paper disputes the claim that the road to development is for poor countries to attract FDI on the scale observed in such countries as Malaysia. This claim involves a fallacy of composition. While FDI can make a valuable contribution, most countries will have to rely mainly on their own resources and indigenous producers. The paper argues that current proposals for a Multilateral Agreement on Investment neglect both the regional aspects of integration and the need of poorer countries to promote their domestic supply capabilities. Conflicts of interest which are ignored in the current rhetoric suggest the continuing relevance of a strategic policy approach to international production. Copyright 1998 by Oxford University Press.