DIRECT FOREIGN INVESTMENT AND THE DIFFERENT TYPES OF INTERNATIONAL TRADE: ARE THEY COMPLEMENTARY OR SUBSTITUTABLE. CASE OF TUNISIA

For a long time, the international trade theory and that of foreign direct investment (FDI) have been relatively separated. However, empirical studies generally found that foreign direct investment and trade are closely related. In fact, FDI has always proved to be either a substitute for internatio...

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Bibliographic Details
Published in:Aktualʹni problemy ekonomiky 2019-01 (214), p.90-104
Main Author: Souguir, Afef
Format: Article
Language:English
Subjects:
Developing countries
Foreign investment
International trade
Investment
LDCs
Studies
Tariffs
Trade agreements
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Summary:For a long time, the international trade theory and that of foreign direct investment (FDI) have been relatively separated. However, empirical studies generally found that foreign direct investment and trade are closely related. In fact, FDI has always proved to be either a substitute for international trade (in the case of tariffjumping hypothesis (the tariff-jumping argument means that the penetration of a foreign market through the FDI is motivated by the existence of tariff barriers) - FDI oriented towards the search for outlets) or a complement to international trade (in the case of intra-company transfers). In fact, the relationship between foreign direct investment and trade has become much more complex under the current World Trade Organization (WTO) regime, where several developing countries started to liberalize imports and concluded trade agreements which significantly reduced transaction costs and encouragedfree trade. With the increasing volumes of trade, the attention ofpolicy makers in the developing countries changed so as to fin out whether FDI drives trade, in other words, if trade can boost FDIflows. In pursuing this objective (the nature of the relationship between FDI and trade) and through an analysis of the data about Tunisia and about the rest of the world, we clearly found a complementary relationship between the trade nature (the total and horizontal intra-industry trade) and investment flows received between 1992 and 2015.
ISSN:1993-6788