Multinational Corporations Advantage in a Globalized World Examining the Impact Regional Free Trade Agreements have on Multinational Corporations’ Foreign Direct Investment Flows
Abstract<br/>Foreign Direct Investment has been pursued to economically integrate countries and to increase economic development. This has been accomplished partly through the WTO and Free Trade Agreements (FTAs), which have spurred foreign direct investment (FDI) by removing barriers to trade tariff and nontariff. In addition, they also created a framework and legal guidelines and regulations for investment and trade. Research suggests that this is the case when looking at country level data before and after FTAs go into effect. Although the existing literature offers important insights a weakness is it does not often look at the relationship between FTAs and FDI by analyzing firm level data. This is an important relationship to be studied as, beyond governments multinational companies (MNCs) are one of few key actors that can benefit the most and have the capabilities to take advantage of these FTAs. Therefore, studying the relationship between MNCs and their investments both before and after an FTA is signed is important to see if FDI would change in response to Free Trade Agreements and have an impact at the MNC level deployment of FDI. This would be significant to see if the current steady for attracting FDI is working. This is also important as FDI helps countries develop. Therefore, it can be seen as an exceptional contribution to the overall research on the subject. In this paper I will explore how companies have reacted to the formation of FTAs as well as the distinct effects of North-South South-South and North-North Agreements on firm’s investment strategies, using firm level data and drawing on interviews with multiple trade officials.