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Foreign Direct Investment in a Small Open Economy and Global Trade Liberalization in Agriculture: A Note

Author

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  • Chaudhuri, Sarbajit

    () (University of Calcutta)

Abstract

In a production structure reasonable for a developing economy this note shows that there may arise a conflict between the worldwide liberalized trade policies in agriculture, which raise the price of the economy’s primary exportable commodity, and the inflow of foreign capital into the economy. However, if the economy strictly adheres to the different facets of the agricultural trade liberalization policies, e.g. the removal of the indirect farm subsidies, the paper argues that the possible conflict may be avoided. The paper provides a theoretical basis for the removal of the farm subsidies if the economy wants to develop its technologically more advanced sectors with an adequate supply of foreign capital.

Suggested Citation

  • Chaudhuri, Sarbajit, 2003. "Foreign Direct Investment in a Small Open Economy and Global Trade Liberalization in Agriculture: A Note," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 563-572.
  • Handle: RePEc:ris:integr:0248
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    More about this item

    Keywords

    Liberalized trade policy in agriculture; Foreign capital inflow; Rate of return on foreign capital; Fertilizer subsidy;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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