Fdi and International Trade

Topics: Investment, Economics, Asia Pages: 7 (2071 words) Published: January 9, 2013
International Trade & Foreign Direct Investment – an economic analysis

Table of contents

|I Introduction |3 | |II International trade |4-7 | |2.1 Benefits of international trade |4-5 | |2.2 Major trends and flows in 2010 |5-6 | |2.3 Explaining the trends and flows of 2010 |7 | |III Foreign direct investment |8-12 | |3.1 Benefits of FDI |8-9 | |3.2 Major trends and flows of FDI in 2010 / 2011 |9-10 | |3.3 Explaining the trends and flows of 2010/2011 |11-12 | |IV Conclusion |13 | |V List of references | 14-15 |


This Paper explains how the particular figures and results of foreign direct investmens and the international trade accrued and what reasons are behind. What conditions have to be complied, what the actual situation is and the amount of commitment, control, risk and profit potentia when entering a new foreign market. First, the basic motivations and used theories that cause a firm to invest abroad or export and outsource production to national firms, have to be understood. But still we cant determine a generally accapted theory because every new evidence add some new criticism and elements to the previous one. (Hosseini, 2005) The purpose of this study is to enable getting an overview of the specific circumstances through analyzing and explaining the main flows and trends and thorugh highliting how these theories were developed and what the motivators are which led to the need for new approaches to enrich economic theroy of FDI and International Trade. This paper aims at overlooking the factors that drives the FDI and the International Trade to go where they do by using different theroies.

Foreign direct investment
1. Definition

FDI (=Foreign direct Investment),an element of rapid globailization proccess, is the buying of permament property an businesses in foreign nations. The most common form of FDI is a foreign subsidiary. FDI is one oft he most advanced, complex, expensive and risky entry strategy between all other facilities abroad so basicly on the other hand the benefit of such a difficult investment has to be even more, which explains that the general FDI has made rapid increases in the last few decades.

There are generally three ways for a firm to engage FDI

- starting a new operation, called Greenfield investment. - to partner or merger with a local firm in the host country - to sell a license to a foreign firm to manufacture their product. 2. Major flows

Global FDI hasnt recoverd fully to its pre-crises level yet. Global inflows of FDI in 2010 totalled $1.12 trillion, a bit more than the $1.11 trillion recorded during 2009 (UNCTAD). Last year for the first time rich countries received less than half of global FDI. With more than $100 billion of FDI poured into China, China has been world's second-largest recipient of such investment. Inflows to China, climbed 11% to 16 billion. With receiving about 20% of all FDI to developing countries over the last 10 years, China is getting very attractive for foreign investors. In 2010...
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