On The Relationship Between Outward Foreign Direct Investment And Trade Of Taiwan A Gricultural Industry By Using The Gravity Model

With the development of economic globalization,international trade and foreign direct investment(FDI)have become two major forms for the countries(regions)to take part in the global economy.Taiwan,as one of the Four Asian Tigers,has developed agricultural economy but its agricultural trade keeps in sustained deficit.Is this deficit in trade related with the outward agricultural FDI of Taiwan?Based on the theories of the relationship between FDI and international trade,the paper describes the current situation of outward agricultural FDI and agricultural trade of Taiwan.By building gravity model,the paper empirically explores the trade effects of outward agricultural FDI of Taiwan(2006-2012)with 13 countries(regions)including Chinese Mainland,Japan,and the US and further analyzes other influencing factors on agricultural trade of Taiwan.According to the empirical results,the paper puts forward the corresponding conclusions.And Chinese Mainland should learn from the experiences of Taiwan to develop the outward agricultural FDI of Chinese Mainland.Firstly,the paper begins with the introduction of the research background and implications.Main research contents and methods are put forward.The literature review mainly covers the related theoretical researches home and abroad on the relationship between international trade and FDI.For the empirical researches,the paper describes the researches and the pertinent results from different perspectives and of different methods.Secondly,the paper analyzes the current situation of outward agricultural FDI and agricultural trade of Taiwan in recent years,which includes the outward agricultural FDI of Taiwan,agricultural trade of Taiwan,and the relationship and characteristics between the above mentioned FDI and trade.Thirdly,by using the theories of the relationship between international trade and FDI and through trade gravity model,the paper builds the function to empirically test the trade effects of outward agricultural FDI of Taiwan with 13 countries(regions)including Chinese Mainland,Japan,the United States from 2006 to 2012 with Eviews7.0 software and the panel data.In addition to outward agricultural FDI as the explanatory variable,other control variables including GDP,geographic distance,and cultural connection are introduced to examine whether there is any substitutive or complementary relation between outward agricultural FDI and agricultural trade of Taiwan.The empirical results show that outward agricultural FDI of Taiwan has substitution effect on its agricultural trade.Among the control variables,the product of GDP between country j and Taiwan as well as the cross product of trade openness of country j and outward agricultural FDI of Taiwan have positive effects on the agricultural trade of Taiwan,geographic distance has substitution effect on agricultural export trade of Taiwan but no significant effect on agricultural import trade of Taiwan,and cultural connection also has no significant effect on the agricultural trade of Taiwan.Finally,on the basis of the empirical results,the paper proposes main conclusions.And Chinese Mainland should learn from the experiences of Taiwan to develop the outward agricultural FDI of Chinese Mainland.