A Study On The Interaction And Policies Between International Trade And Foreign Direct Investment: Evidence For China With ASEAN

With the deepening of the economy global liberation and international division and the development of the MNC, international trade and FDI have been in great changes.And their relationship has also changed: mutual substitution, mutual to mutual integration. As the above change, many scholars begin to research the relationship, and try to build an analysis frame which can get together international and FDI, to contact them organicly and make them be in coordination.Currently, many scholars have researched the relationship between international trade and FDI in China with an empirical method, but most of them only have used the gross of international trade and FDI in china to study the relationship, and their conclusion indicated that FDI promoted the development of international trade of China. But this paper just reviews their relationship with point of view of the mutual trade and investment between China and ASEAN. It aims to research the interaction of their trade from mutual direct investment between China and ASEAN these two developing countries. And this paper also research the relationship between the choice of trade and FDI policy and how it force the foreign firm to choose an incfficient mode of supply, with a situation where domestic government is restricted by numerous agreements of FDI.In this paper, it firstly reviews the theories of international trade and FDI, and simply analyses the research of the interaction between international trade and FDI which given by the scholars recently. Through the above, it shows the substitution and complement between FDI and international trade. Furthermore Helmberger, Schmitz (1970) points that it is actually an empirical study but not a theorical problem about whether it is substitution or complement between international trade and FDI.Secondly, it analyses the situation of the trade and direct investment between China and ASEAN, and gives the experiential analysis about their interaction. It points that the trade between China and ASEAN is mainly traditional industries'trade. But the direct investment from ASEAN to China weakly influences the trade between them, as it concentrates in the industries which based on high degree of labor. Then it adopts the empirical analysis by using the dates of the direct investment from ASEAN to China and the trade of import and export from China to ASEAN.Furthermore, this paper analyses the trade structure and intra-industry trade situation between China and ASEAN, which indicates that they gradually go to intra-industry trade from traditional industry trade. And it extends to form the complemental division. But now the intra-industry trade between them is still mainly plumb intra-industry trade, which is different from level intra-industry trade between the developed countries. It shows that they are still in a lower level.And then this paper totally shows the international trade and FDI policy, and it simply analyses that a country's trade and FDI policy how to influence its FDI and trade. And it builds a model which a domestic government how to set policy and foreign firms how to select the model of supply. And it represents the status quo: domestic government faces constraints on the use of trade policy (due to commitments on international trade agreements), but not on investment policy.Our analysis suggests that the primary benefit of constraining FDI policy given that trade is free is primarily distributional: such a constraint would limit the ability of governments to extract rents from foreign investors.At last this paper totally analyses and compares the situation of trade and investment policy between China and ASEAN, and it gives the suggestions of trade and investment policy between China and ASEAN, and of our trade and investment policy.