International Commercial Interests and Manufacturers＇ IFDI Policy Preferences

• Published in: China economist (Beijing, China) China), 2017-03, Vol.12 (2), p.34-45
• Main Author: 吴其胜
• Format: Article
• Language: English
• Subjects: Competition; Dependency theory; Developing countries; Domestic markets; Globalization; Host country; Industrialized nations; Labor unions; LDCs; Liberalization; Manufacturers; Manufacturing; Multinational corporations; Politics; Preferences
• ISSN: 1673-8837

Similar to the cross-border flow of commodities through trade, the global allocation of capital and the globalization of manufacturing are also subject to important domestic political influence. By increasing demand for production factors and supply of products, the inflow of IFDI will increase competitive pressures facing manufacturers in the host country. This effect is similar to the import of goods. As such, in the face of external competitive pressures, the host country＇s manufacturers will oppose the inflow of foreign capital like they oppose the import of commodities unless restrictive measures are introduced. However, as revealed by the analysis on the attitudes of US semiconductor, renewable energy and steel manufacturers toward lFDI since the 1980s, whether or not the manufacturers of a host country will call for restrictive or discriminatory policy against IFDI is largely influenced by the magnitude of their commercial interests in the source country of investment. A major factor of such influence is the potential reaction of the source country. Specifically, when a manufacturer has significant commercial interests in the source country of investment, this manufacturer is more likely to have an open policy preference toward direct investment from this country, and vice versa.