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DIRECT FOREIGN INVESTMENT IN A SMALL OPEN ECONOMY AND GLOBAL TRADE LIBERALIZATION IN AGRICULTURE: A NOTE

Sarbajit Chaudhuri ()

International Trade from EconWPA

Abstract: In a production structure reasonable for a developing economy this note shows that there may arise a conflict between the worldwide liberalized trade policies in agriculture, which raise the price of the economy’s primary exportable commodity, and the inflow of foreign capital into the economy. However, if the economy strictly adheres to the different facets of the agricultural trade liberalization policies, e.g. the removal of the indirect farm subsidies, the paper argues that the possible conflict may be avoided. The paper provides a theoretical basis for the removal of the farm subsidies if the economy wants to develop its technologically more advanced sectors with an adequate supply of foreign capital.

Keywords: Liberalized trade policy in agriculture; foreign capital inflow; rate of return on foreign capital; fertilizer subsidy (search for similar items in EconPapers)
JEL-codes: F10 F13 O19 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ifn and nep-int
Date: 2005-10-23
Note: Type of Document - pdf; pages: 9
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