The Impact Of Free Trade Agreements On Foreign Direct Investment

Dhingra, S., H. Huang, G. Ottaviano, J. Paulo Pessoa, T. Sampson and J. Van Reenen (2017), costs and benefits of leaving the EU: trade effects, economic policy, 32 (92), 651-705. Horstmann, I. J. and J.

R. Markusen (1987), Strategic Investments and Multinational Development, International Economic Review, 28(1), 109-121. This paper aims to empirically identify the impact of free trade agreements on FDI vis-à-vis outside and inside Korea. Given the income gap between Korea and its free trade partners, we believe that free trade agreements have a positive impact on foreign direct investment in developing countries and foreign direct investment from industrialized countries. One of the underlying sources of the hypothesis is the venture capital model, which deals with the positive (negative) relationship between commercial costs and horizontal (vertical) FDI. We test the hypothesis using data on free trade agreements and free trade agreements between Korea and Korea over the 2000-2010 period. We find that our empirical results support the hypothesis and, furthermore, free trade agreements generally favour directly favourable businesses by creating a favourable environment. Beugelsdijk, S., T. Pedersen and B.

Petersen (2009), Is there a trend towards global specialization of the value chain? An audit of the cross-border sale of foreign tochter companies in the United States, Journal of International Management, 15(2), 126-141. Douch, M., T. H. Edwards and C. Soegaard (2018), The trade effects of the Brexit announcement shock, Warwick Economics Research Papers, 1176. Baier, S.L., J. H. Bergstrand, P. Egger and P. A. McLaughlin (2008), how economic integration agreements work? Questions of understanding the causes and consequences of the growth of regionalism, The World Economy, 31 (4), 46-497. There has been great Euroscepticism in recent years, although the EU project seems to have brought significant economic benefits to its Member States.

In Britain, this skepticism led to the Brexit vote on 23 June 2016. More than three years later, after major political convulsions and uncertainties, the UK has left the EU. This year, the EU and the UK will negotiate the future trade agreement, which will foreshadow future relations between the two sides. The economic consequences of Brexit will depend on this agreement (Dhingra et al., 2017). While the BRITISH government wants a trade agreement similar to the one signed by the EU with Canada (CETA), the EU is after a broader agreement (Aigle, 2020, March 2). It is likely that the impact of Brexit on the UK will be closer to the expected average impact of countries that have never adopted the euro. Nevertheless, the UK has been a member of the EU for 40 years and one of DL`s largest global shareholders. Therefore, the average incidence of an EXIT from the EU is considered a ceiling. The data sources are bilateral OECD flows and stocks data bmD3 and BMD4, the World Bank`s FTA database, World Bank development indicators and the UNCTAD database on international investment agreements. The World Bank`s FTA database includes 279 agreements signed by 189 countries between 1958 and 2015.

The database contains not only the date of the FTA`s signature, but also its contents; it offers any agreement irreflectably in the form of provisions for various policy areas (see Hofmann et al., 2017). The results show that there is a complementary link between direct bilateral liberalization and trade liberalization.

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