The Study Of The Effect Of Regional Economic Integration On Foreign Direct Investment

With the continuous progress of technology and the increasing improvement of financial system,the global economy has been linked with each other more and more closely.Although there are still inverse forces of globalization recently,economists and policy makers have reached an agreement that it's important to maintain the liberality of trade and investment in a proper range rather than protectionism.However,due to the differences in economic development conditions and interests among countries,it finally leads to a deadlock in Doha Round negotiation which covers more than 100 countries.Under this situation,the regional economic integration involving two or several countries(not too many)has become more acceptable.The original goal for the regional economic integration is to make trade much freer.However,with the development of multinational corporations,FDI has become a more important and effective way for foreign products to enter local market besides trade.More and more countries are trying their best to attract FDI because its obvious positive impact on local technology,market competition,investment environment and so on compared with trade.Therefore,they will add relative investment clauses to newly signed or existing regional trade agreements.According to data statistics,we find that there is a high relativity and consistency between RTAs and FDI.We make a deduction that the regional economic integration has a positive impact on FDI.Based on theoretic and empirical analysis,this essay tries to figure out the possible mechanisms of the regional economic integration on FDI.After that,we build three new variables and estimate a gravity model with Heckman two-step method based on a sample of 166 countries during 2001-2012.The results show that the regional economic integration involving both the host country and the home country definitely promotes bilateral FDI,and the integration including the host(home)country and the third country can also boost bilateral FDI.There are many uncertainties for global economy now.China is supposed to assume the responsibility and establish mutually beneficial trade and investment relations with its partners by achieving more RTAs.In this process,China will become the axis power in the regional economic integration network,so that the dividends of reform can be generated by the liberalization of trade and investment.