1. Global FDI Policy: Correcting a Protectionist Drift
- Author:
- David M. Marchick and Matthew J. Slaughter
- Publication Date:
- 06-2008
- Content Type:
- Working Paper
- Institution:
- Council on Foreign Relations
- Abstract:
- A distinguishing feature of the current era of globalization has been cross-border flows of foreign direct investment (FDI) in which businesses in one country own part or all of businesses in other countries. Indeed, FDI flows have grown at much faster rates than have flows of goods and services. From 1990 through 2006, worldwide cross-border inflows of FDI rose an average of 12.4 percent annually, versus 7.7 percent growth in total exports of goods and services and 5 percent overall economic growth. Since 2003, world FDI flows have grown even faster—at an astonishing 30 percent per year—although they will likely drop precipitously this year with the worldwide economic slowdown. Many popular accounts of the current era of globalization see its distinguishing feature as the expansion of FDI and the creation of cross-border production networks by multinational companies. Even more than trade liberalization, investment liberalization has been the strongest driver of growth worldwide, giving a significant boost to economies in developing and developed countries. The decision by many countries over the past two decades to abandon long-standing restrictions on foreign investment has contributed substantially to the spread of prosperity.