Trade versus Direct Investment: Modal Neutrality and National Treatment
International agreements increasingly constrain the ability of governments to use trade policies whereas few constraints apply to the use of investment policies. Using a model in which a local and a foreign firm compete in the domestic market, we analyse whether the foreign firm may be forced to adopt an inefficient mode of supply (exports versus FDI) when the domestic government is constrained in its ability to use trade policy, but is free to set its FDI policy. We find that the foreign firm chooses the efficient mode of supply, even under a discriminatory output tax levied on FDI. This result suggests that the case for multilateral investment rules on efficiency grounds needs careful evaluation.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||May 2002|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- James A. Brander, 1995.
"Strategic Trade Policy,"
NBER Working Papers
5020, National Bureau of Economic Research, Inc.
- Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
- Konishi, Hideo & Saggi, Kamal & Weber, Shlomo, 1999. "Endogenous trade policy under foreign direct investment," Journal of International Economics, Elsevier, vol. 49(2), pages 289-308, December.
- Theodore H. Moran, 1998. "Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 53, 03.
- Hoekman, Bernard & Saggi, Kamal, 2000. "Assessing the Case for Extending WTO Disciplines on Investment-Related Policies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 629-653.
- Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3375. 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: ()
If references are entirely missing, you can add them using this form.