Increasing the Size of the ‘Country’: Regional Economic Integration and Foreign Direct Investment in a Globalized World Economy

Two contradictory trends characterized the world economy during the approach to the twenty-first century. First, the globalization of the economy, together with the successful conclusion of the Uruguay Round and the establishment of the World Trade Organization (WTO), brought about a steady decline in barriers to international business transactions. Second, however, as countries have lost their conventional powers to protect themselves from the outside world, they have grouped together, often on a pan-continental basis, into regional trading blocs. Regional economic integration, in the form of institutions such as the North American Free Trade Agreement (NAFTA), the European Union (EU) or the Asia-Pacific Economic Co-operation (APEC), represents the main way that remains accessible to countries in their attempt to maintain and promote their levels and shares of world investment, employment, income and growth.