Why Are Trade Agreements More Attractive In The Presence Of Foreign Direct Investment?
This paper argues that interests of nationals (i.e., domestic residents) and owners of home-based foreign capital in the formation of a Trade Agreements (TA) are not antagonistic, except under rather particular assumptions on initial tariffs among potential members. Further, if initial tariffs are endogenously determined through an industrylobbying process, then TA that would have been immiserising in the absence of Foreign Direct Investment (FDI), may be welfare-enhancing in the presence of foreign-owned firms. The rationale is linked to the effect that the entry of FDI has on the pre-TA tariff, through contributions to the incumbent government. These results may help explain recent integration programs between developed and developing countries.
Volume (Year): 134 (1998)
Issue (Month): IV (December)
|Contact details of provider:|| Postal: |
Phone: +41 (0)44 631 32 34
Fax: +41 (0)44 631 39 01
Web page: http://www.sjes.ch
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olarreaga, M., 1995.
"Tariff Reductions in the Presence of Foreign Direct Investment,"
Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva
95.11, Institut d'Economie et Econométrie, Université de Genève.
- Olarreaga, Marcelo, 1996. "Tariff Reductions in the Presence of Foreign Direct Investment," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 263-75, October.
- Grossman, G.M. & Helpman, E., 1992.
"Protection for Sale,"
21-92, Tel Aviv.
- Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Peter Robson & Ian Wooton, 1993. "The Transnational Enterprise and Regional Economic Integration," Journal of Common Market Studies, Wiley Blackwell, vol. 31(1), pages 71-90, 03.
- Bhagwati, Jagdish N. & Tironi, Ernesto, 1980. "Tariff change, foreign capital and immiserization : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 7(1), pages 71-83, February.
- J. Bhagwati & R. Brecher, 1978.
"National Welfare in an Open Economy in the Presence of Foreign Owned Factors of Production,"
224, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bhagwati, Jagdish N. & Brecher, Richard A., 1980. "National welfare in an open economy in the presence of foreign-owned factors of production," Journal of International Economics, Elsevier, vol. 10(1), pages 103-115, February.
- Glenn W. Harrison & Thomas F. Rutherford & Ian Wooton, 1993. "An Alternative Welfare Decomposition for Customs Unions," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 961-68, November.
- Dick, Andrew R., 1993. "Strategic trade policy and welfare : The empirical consequences of cross-ownership," Journal of International Economics, Elsevier, vol. 35(3-4), pages 227-249, November.
- Venables, Anthony J., 1987. "Customs union and tariff reform under imperfect competition," European Economic Review, Elsevier, vol. 31(1-2), pages 103-110.
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- Brecher, Richard A & Bhagwati, Jagdish N, 1981.
"Foreign Ownership and the Theory of Trade and Welfare,"
Journal of Political Economy,
University of Chicago Press, vol. 89(3), pages 497-511, June.
- J. N. Bhagwati & R. A. Brecher, 1979. "Foreign Ownership and the Theory of Trade and Welfare," Working papers 249, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jonathan Eaton & Gene M. Grossman, 1983.
"Optimal Trade and Industrial Policy Under Oligopoly,"
NBER Working Papers
1236, National Bureau of Economic Research, Inc.
- Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
- Richard E. Baldwin & Rikard Forslid & Jan I. Haaland, 1996. "Investment Creation and Diversion in Europe," The World Economy, Wiley Blackwell, vol. 19(6), pages 635-659, November.
- Markusen, James R., 1981. "The distribution of gains from bilateral tariff reductions," Journal of International Economics, Elsevier, vol. 11(4), pages 553-572, November.
- Massimo Motta & George Norman, 1993.
"Does economic integration cause foreign direct investment?,"
Economics Working Papers
28, Department of Economics and Business, Universitat Pompeu Fabra.
- Motta, Massimo & Norman, George, 1996. "Does Economic Integration Cause Foreign Direct Investment?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
- Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
- Harris, R., 1994. "Customs Union Theory in oligopoly," Discussion Papers dp94-09, Department of Economics, Simon Fraser University.
When requesting a correction, please mention this item's handle: RePEc:ses:arsjes:1998-iv-5. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Steiner)
If references are entirely missing, you can add them using this form.