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Linkages amongst Foreign Direct Investment, Trade and Trade Policy: An Economic Analysis with Applications to the Food Sector

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  • Wilson, Norbert L.W.

Abstract

Our models show that, in OECD countries, tariffs and domestic support, which raise domestic market input prices, can have an effect on how FDI is distributed geographically. FDI may be used to jump tariffs. Investors in a home country may invest in a host country to exploit the preferential tariffs, as from an RTA, which the host has with a third country. Domestic support to agriculture, an input sector into the food sector, can encourage outward investment and discourage inward investment. FDI and trade appear to complement one another. Therefore, policies that open trade may increase FDI and vice versa.

Suggested Citation

  • Wilson, Norbert L.W., 2006. "Linkages amongst Foreign Direct Investment, Trade and Trade Policy: An Economic Analysis with Applications to the Food Sector," 2006 Annual meeting, July 23-26, Long Beach, CA 21064, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea06:21064
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    File URL: http://purl.umn.edu/21064
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    References listed on IDEAS

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    1. Munisamy Gopinath & Daniel Pick & Utpal Vasavada, 1999. "The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 442-452.
    2. Tsunehiro Otsuki & John S. Wilson, 2001. "What price precaution? European harmonisation of aflatoxin regulations and African groundnut exports," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 28(3), pages 263-284, October.
    3. West, D. & Vaughan, O., 1995. "Multinational Firms, Investment and Trade in Canada's Food and Beverage Industry: Policy Implications," Papers 7/95, Gouvernement du Canada - Agriculture Canada.
    4. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    5. Barrell, Ray & Pain, Nigel, 1996. "An Econometric Analysis of U.S. Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 200-207, May.
    6. Lionel Fontagné, 1999. "Foreign Direct Investment and International Trade: Complements or Substitutes?," OECD Science, Technology and Industry Working Papers 1999/3, OECD Publishing.
    7. Bolling, H. Christine & Neff, Steven & Handy, Charles R., 1998. "U.S. Foreign Direct Investment in the Western Hemisphere Processed Food Industry," Agricultural Economics Reports 34017, United States Department of Agriculture, Economic Research Service.
    8. Chakrabarti, Avik, 2003. "A theory of the spatial distribution of foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 12(2), pages 149-169.
    9. Marchant, Mary A. & Saghaian, Sayed H. & Vickner, Steven S., 1999. "Trade And Foreign Direct Investment Management Strategies For U.S. Processed Food Firms In China," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 2(02).
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    Cited by:

    1. Boubacar, Inoussa, 2016. "Spatial determinants of U.S. FDI and exports in OECD countries," Economic Systems, Elsevier, vol. 40(1), pages 135-144.
    2. Wilson, Norbert L.W., 2007. "What a Difference a Day Makes: An Estimate of Potential Gains from Trade Facilitation," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9958, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Marilyne Huchet-Bourdon & Anna Lipchitz & Audrey Rousson, 2009. "Aid for Trade in Developing Countries: Complex Linkages for Real Effectiveness," African Development Review, African Development Bank, vol. 21(2), pages 243-290.

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    Keywords

    International Relations/Trade;

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