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Multinational Corporations and Pacific Regionalism

Philippa Dee

Trade Working Papers from East Asian Bureau of Economic Research

Abstract: The purpose of this paper is twofold. The first is to determine empirically whether there is a unique regional model of foreign direct investment (FDI) somewhere in the AsiaPacific region, driven by complex network behaviour of multinational corporations. The second is to determine empirically whether the investment provisions of preferential trade agreements (PTAs) have had any influence on this regional investment behaviour. The results suggest that the answer to the first question is affirmative and the answer to the second is negative. They show that when FDI and trade are sufficiently driven by fundamentals, as in Asia, the resulting network patterns of investment do not need to be boosted by investment provisions of PTAs. Further, the network patterns can be sufficiently strong to insulate a country from investment diversion when the FDI source countries play the PTA game elsewhere. So the investment provisions of PTAs pose neither a threat nor a promise to FDI in the Asian region. But a very real threat may come from the trade provisions of PTAs.

Date: 2006-01
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