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This study explores the impact of Regional Integration Agreements (RIAs) on Foreign Direct Investment (FDI) flows, particularly how investment liberalization shapes these dynamics among multinational enterprises (MNEs). It identifies three groups of countries - those with active promotion (UK), passive promotion (Germany), and those in transition (Scandinavian countries). The research utilizes models like the tariff-jump and internalization models to analyze the effects of liberalization on interregional and intra-regional FDI flows, particularly in the context of the EU’s Single Market Programme (SMP).
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Economic Integration: MNEs Primary aim: Effects on FDI-flows deriving from ip on Regional Integration Agreements (RIAs)
Ip option: Investment liberalisation • Three groups of countries: • Active promotion (UK) • Passive promotion (Germany) • Promotion in transition (Scandinavian countries)
Models for ip-analyses: • The “tariff-jump model” (horizontal FDI) • The “internalization model” (vertical FDI and trade takes place inside firms ) Policy-effects of liberalisation on • ‘Interregional FDI-flows’ • ‘Intra-regional FDI-flows’
Changes in inter- and intra-regional flows due the EU’s Single Market Programme (SMP)? • Probable impact of SMP on FDI for the whole EU: • The share of worldwide FDI flowing 1982-7 1991-3 • Into the EU 28,2% 44,4% • (into the USA) 39,9% 10,2% • Individual countries Intra-EU FDI Extra-EU • inflows inflows • (EU-12 = 100) • 1986 1990-3 1986 1990-3 • Loosers • UK 25 14 47 37 • Netherlands 18 12 13 10 • Spain 17 14 15 9 • Winners • Belg/Lux 7 17 2 9 • Ireland 1 7 0 4 • Germany 9 11 3 5