Direct Foreign Investment in a Small Open Economy and Global Trade Liberalization in Agriculture: A Note
Forthcoming in Journal of Economic Integration, Vol. 18, No 3, September 2003
Posted: 17 Apr 2002
Abstract
In a production structure reasonable for a developing economy this note shows that there may arise a conflict between the worldwide liberalized trade policies in agriculture, which raise the price of the economy’s primary exportable commodity, and the inflow of foreign capital into the economy. However, if the economy strictly adheres to the different facets of the agricultural trade liberalization policies, e.g. the removal of the indirect farm subsidies, the paper argues that the possible conflict may be avoided. The paper provides a theoretical basis for the removal of the farm subsidies if the economy wants to develop its technologically more advanced sectors with an adequate supply of foreign capital.
JEL Classification: F10, F13, O19
Suggested Citation: Suggested Citation