Relationship between FDI and international trade.doc

1、Relationship between FDI and international trade【Abstract】During the last decades, the relation between FDI and economic growth has been extensively discussed in the economic literature. In this paper, the relationship between FDI and international trade is combed from the theoretical, empirical and

2、 political and economic point of view and some suggestions are given. 【Key worlds】FDI International trade Substitute Supplement 、Introduction Foreign investments and international trade are focus of researchers for the enormous influence of these phenomena on the overall economy of any nation in the

3、 world. Research findings do not conclusively point to the direction of causality between trade and investment and due to significant role of them in the growth dynamics of various economies, empirical research works have been endeavored in this connection. 、Literature Review 1、Theoretical considera

4、tions Helpman (1984) and Helpman and Krugman (1985) illustrate that the degree of specialization is a positive function of relative factor endowments. If differences in factor endowments are not substantial, a capital-abundant country will produce capital-intensive differentiated goods at home and e

5、xchange them for the labor-intensive homogeneous good from a labor-abundant country. Thus, FDI generates complementary trade flows from the labor-intensive country. 2、Empirical analysis Zhang(2005) made a correlation analysis of Chinas actual use of FDI, Chinas export scale and export competitivenes

6、s. The study showed that FDI expands the scale of Chinas foreign trade and improves the competitiveness of exports. Chen (2006) thought FDI and Chinas exports have some positive correlation after analyzing the data of 1982-2003. 、The political economy study on FDI and international trade relations 1

7、、Relevant theoretical analysis The economist who earlier proposed the concept of compensation for investment was Bhagwati (1987). Bhagwati used a standard two countries, two products, the two factors of production, general equilibrium model of international trade to analyze the optimal choice of inv

8、estment in countrys exports and investment. Bhagwati (1992) combed the political economy research of FDI and international trade relations. They believe that the compensation for investment can reduce the host countrys trade protection by the two ways: Protect the supply and protect the demand. 2、Em

9、pirical analysis Azrak and Wynne (1995) ever took out an empirical analysis about whether U.S. anti-dumping to Japan will affect the Japanese investment in U.S. manufacturing and concluded: the protection is likely to promote FDI inflows, but the effect was not significant. Bruce A. Blonigen and Rob

10、ert C. Feenstra(1996) used the data of Japan on U.S. investment and trade, and made a correlation analysis of FDI and trade threats. The results show that early FDI has certain defusing effect on escape clausing investigation and has no defusing effect on anti-dumping investigation. 、Recommendations

11、 for the future in the field and future perspectives 1、Strengthen the research about FDIs impact on investing countrys importing. 2、Strengthen the research about FDIs impact on services on international trade. 3、Strengthen the research about FDIs impact on cross-industry international trade. Referen

12、ces： 1 Azrak, Paul and Kevin Wynne., ( 1995) “Protectionism and Japanese Direct Investment in the United States,” Journal of Policy Modeling 17 ( 3) :293- 305. 2Bhagwati, Jagdish N., Richard A. Brecher, Elias Dinopoulos, and T.N.Srinivasan., ( 1987) “Quid Pro Quo Foreign Investment and Welfare:A Pol

13、itical - Economy - Theoretic Model,” Journal of Development Economics 27:127- 138. 3Rappaport, J. (2000). “How Does Openness to Capital Flows Affect Growth?”. Research Working Paper, RWP 00-11 Federal Reserve Bank of Kansas City, December. 4Van Loo, F. (1977). The Effect of Foreign Direct Investment on Investment in Canada. Review of Economics and Statistics, 59 (4): 474-81. 5张为付, 武齐.外国直接投资与我国对外贸易的实证研究J .国际贸易问题,2005, ( 12) . 6陈波.FDI 与中国对外贸易的实证分析J .财经论坛, 2006, ( 1) .