Foreign trade and FDI stocks in British, US and French industries: complements or substitutes?

Abstract

This chapter presents new empirical evidence about the impact of foreign direct investment on the level and composition of international trade. Foreign direct investment (FDI) and international production have both continued to expand rapidly in recent years. Global inflows of FDI rose by an average 19 per cent per annum between 1991 and 1997, and by an estimated 38 per cent in 1998, to reach roughly $644 billion. Around 50,000 parent companies, with 450,000 affiliates now operate worldwide (UNCTAD, 1998). The foreign affiliates alone account for 6 per cent of world GDP, compared with 2 per cent in 1982 (Hummels, 1998). Intra-firm trade now accounts for one-third of world exports, with the sales of foreign affiliates having risen faster than global trade in recent years.

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