ABSTRACT
Many economists are more interested in trade matters than investment — despite the growth which has occurred in worldwide FDI flows over recent years. There is a voluminous literature on strategic trade policies which examines the effects of tariffs or subsidies on traded goods and production. In contrast, there has been little analysis of the strategic implications of FDI. What there is has been limited to the rivalrous behaviour of oligopolistic firms. This is all the more surprising when one considers that in 1992 the global sales of the affiliates of multinational enterprises (MNEs) were estimated to be $5.2 trillion, compared with world exports of goods and non-factor services of $4.9 trillion (UNCTAD 1995). Thus, it could be argued that FDI has eclipsed the role of trade flows in the world economy.
