Regional Integration and Foreign Direct Investment

Abstract

AbstractIt is suggested that the most serious challenge facing a study of the relationship between regional integration and foreign direct investment is the multidimensional nature of the issue. In particular, there is reason to believe that the relevant linkages will vary between different integration agreements, and between countries and industries participating in any specific agreement. This chapter therefore sets out some broad theoretical considerations surrounding the linkages between regional integration agreements and foreign direct investment. It then refines these broad considerations into a more focused framework that accounts for some indirect linkages that have, hitherto, been largely ignored in the relevant literature. A brief examination is then made of three recent, and very distinct, cases of regional integration in North and South America with reference to the framework already discussed: Canada joining CUSFTA (the Canada–USA Free Trade Agreement); Mexico's accession to NAFTA (North American Free Trade Agreement); and the first stage of integration in MERCOSUR (Mercado Comun del Sur).