International Investments and Rising Protectionism

The relationship between international investments and protectionism is an evolving one. U.S. multinational enterprises have traditionally invested in Latin America for import substituting reasons. In other words, the foreign firm entered in order to take advantage of the internal market. In recent years, however, these firms have turned more and more to export markets, given the collapse of purchasing power in Latin America. Japanese multinational enterprises, on the contrary, have traditionally invested abroad to take advantage of lower costs for the production of goods then reimported into Japan, and in general for exports on the world market. This tendency has seen an acceleration since 1985, i.e., since the upward pressure on the yen began. There are other reasons for international investments but the two mentioned are clearly the most important. International investments occur to take advantage of national markets, particularly when access becomes difficult due to protectionist walls. International investments also occur to take advantage of differences in labor costs as a springboard to conquer a corner of global markets…