Article

Behind the Screen: Understanding National Support for a Foreign Investment Screening Mechanism in the European Union

Authors:
To read the full-text of this research, you can request a copy directly from the authors.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the authors.

... However, Meunier has gone furthest as her early work addresses how Chinese FDI threatens the EU's unity regarding the cacophony of national FDI rules and the competition amongst the EU Member States (Meunier, 2014a;Meunier, 2014c;Meunier et al., 2014). Her later work analyses how the hostile public opinion towards China in the Member States fostered EU integration on FDI policy (Meunier, 2019;Chan & Meunier, 2020;Meunier & Mickus, 2020 (Wendt, 1992, pp. 392-395). ...
Thesis
Full-text available
The introduction of the EU’s FDI Screening Regulation is not only extraordinary but also harmful to its legitimacy, as the open market mantra is built into the Union's liberal identity. This thesis aimed to answer why the EU introduced this extraordinary measure. Presenting an issue as an existential threat – securitisation – can legitimise an extraordinary measure (Buzan et al., 1998, p. 26), hence, discourse analysis was conducted on the Commission’s documents and speeches about the Regulation (EU) 2019/452 from 2016 to 2020. Using the securitisation theory of the Copenhagen School, this thesis uncovered the securitisation of Chinese FDI in the Commission’s policy discourse on the proposal for establishing a framework for the screening of FDI into the Union. It reveals that the idea of a ‘China threat’ is based on a binary distinction between the EU as the market-oriented protagonist and China as the strategic antagonist. Against this background, economic, military, and political securitisation were prevalent in the European Commission’s discourse, with each showing dominance in a discourse format that is appropriate for their designated style of speaking security. This may suggest that the Commission considers when to speak which type of security rhetoric. Only societal securitisation proved to be irrelevant, but it is outweighed by the other forms of securitisation. [Published on E-International Relations]
Article
Full-text available
This is the introduction to a special collection of contributions that analyse key features of the European Union’s (EU) trade policy in the twenty-first century, notably its politicization. As such, it examines the degree to which EU trade policy and its environment have changed over the last 20 years. More specifically, it begins with a brief review of the main changes to the structure of international trade and the resulting impacts on trade agreements. Second, it describes the institutional changes (notably the Lisbon Treaty) that have affected the EU’s trade policy-making. Third, it discusses how the above-mentioned changes have affected the EU’s trade policy. Finally, it summarizes the special collection’s key contributions to our improved understanding of EU trade policy in the twenty-first century as well as pinpoints new issues that scholars of EU trade policy should pay close attention to in their future research agendas.
Article
Full-text available
The past three decades have witnessed a spectacular evolution in policies toward foreign direct investment (FDI). Whose interests do these policy innovations reflect? While existing theory suggests popular pressure drives openness, I argue reforms occur when shifts in financial access change local economic elites’ policy preferences toward FDI. When large domestic firms no longer have access to cheap credit through political connections, liquidity constraints outweigh firms' preferences to exclude foreigners. Economic elites then pressure governments to pursue liberal FDI policy environments. Using a combination of measures of FDI policy for up to 166 countries from 1973–2015, I find increases in financial constraints are robustly associated with decreases in foreign equity restrictions, and this relationship is strongest when domestic political institutions favor business interests. A financing constraints explanation of FDI policy reform has important implications for explanations of policy change, theories of business power amid increased interdependence, and expectations over the distributive effects of globalization.
Article
Full-text available
Two recent developments have the potential to fundamentally alter the conventional view of EU trade policy-making: the emergence of global value chains (GVCs) and the recent backlash against globalization. In this paper we summarize the conventional wisdom after which we delineate the main expectations derived from the GVC and the globalization-backlash perspectives. In so doing, we focus on the EU's trade and non-trade preferences, and the EU's ability to achieve its preferences in international trade negotiations. We then discuss the research agenda that would allow testing the expectations derived from these different perspectives. A key point that emerges from this discussion is that the conventional perspective, the GVC perspective, and the globalization-backlash perspective may all be needed to fully understand EU trade policy. The challenge is to know under which conditions which of these perspectives best explains the process and outcomes of EU trade policy-making.
Book
Full-text available
Since China adopted its 'open door' policy in 1978, which altered its development strategy from self-sufficiency to active participation in the world market, its goal has remained unchanged: to assist the readjustment of China's economy, to coordinate its modernization programs, and to improve its quality of life. With the 1997 launch of the 'Going Global' policy, an outward focus regarding foreign investment was added, to circumvent trade barriers and improve the competitiveness of Chinese firms. In order to accommodate inward and outward investment, China's participation in the international investment regime has underpinned its efforts to join multilateral investment-related legal instruments and conclude international investment agreements. This collection, compiled by award-winning scholar Professor Julien Chaisse, explores the three distinct tracks of China's investment policy and strategy: bilateral agreements including those with the US and the EU; regional agreements including the Free Trade Area of the Asia Pacific; and global initiatives, spear-headed by China's presidency of the G20 and its 'Belt and Road initiative'. The book's overarching topic is whether these three tracks compete with each other, or whether they complement one another - a question of profound importance for the country's political and economic future and world investment governance.
Article
Full-text available
China’s massive ‘Belt and Road Initiative’ (BRI) – designed to build infrastructure and coordinate policymaking across Eurasia and eastern Africa – is widely seen as a clearly-defined, top-down ‘grand strategy’, reflecting Beijing’s growing ambition to reshape, or even dominate, regional and international order. This article argues that this view is mistaken. Foregrounding transformations in the Chinese party-state that shape China’s foreign policy-making, it shows that, rather than being a coherent, geopolitically-driven grand strategy, BRI is an extremely loose, indeterminate scheme, driven primarily by competing domestic interests, particularly state capitalist interests, whose struggle for power and resources are already shaping BRI’s design and implementation. This will generate outcomes that often diverge from top leaders’ intentions and may even undermine key foreign policy goals.
Article
Full-text available
Large genomic studies are becoming increasingly common with advances in sequencing technology, and our ability to understand how genomic variation influences phenotypic variation between individuals has never been greater. The exploration of such relationships first requires the identification of associations between molecular markers and phenotypes. Here we explore the use of Random Forest (RF), a powerful machine learning algorithm, in genomic studies to discern loci underlying both discrete and quantitative traits, particularly when studying wild or non-model organisms. RF is becoming increasingly used in ecological and population genetics because, unlike traditional methods, it can efficiently analyze thousands of loci simultaneously and account for non-additive interactions. However, understanding both the power and limitations of Random Forest is important for its proper implementation and the interpretation of results. We therefore provide a practical introduction to the algorithm and its use for identifying associations between molecular markers and phenotypes, discussing such topics as data limitations, algorithm initiation and optimization, as well as interpretation. We also provide short R tutorials as examples, with the aim of providing a guide to the implementation of the algorithm. Topics discussed here are intended to serve as an entry point for molecular ecologists interested in employing Random Forest to identify trait associations in genomic data sets. This article is protected by copyright. All rights reserved.
Article
Full-text available
The European Union (EU) project of combining a single market with a common currency was incomplete from its inception. This article shows that the incompleteness of the governance architecture of Europe’s Economic and Monetary Union (EMU) was both a cause of the euro crisis and a characteristic pattern of the policy responses to the crisis. We develop a “failing forward” argument to explain the dynamics of European integration using recent experience in the eurozone as an illustration: Intergovernmental bargaining leads to incompleteness because it forces states with diverse preferences to settle on lowest common denominator solutions. Incompleteness then unleashes forces that lead to crisis. Member states respond by again agreeing to lowest common denominator solutions, which address the crisis and lead to deeper integration. To date, this sequential cycle of piecemeal reform, followed by policy failure, followed by further reform, has managed to sustain both the European project and the common currency. However, this approach entails clear risks. Economically, the policy failures engendered by this incremental approach to the construction of EMU have been catastrophic for the citizens of many crisis-plagued member states. Politically, the perception that the EU is constantly in crisis and in need of reforms to salvage the union is undermining popular support for European integration.
Article
Full-text available
For more than 50 years, the European Union (EU) was not in charge of international investment agreements; its member states were, and they negotiated more than 1,200 bilateral investment treaties (BITs) with third countries. This lack of internal EU cohesiveness created costs for Europe, notably in terms of bargaining leverage over market access and ability to shape international norms. The 2009 Lisbon Treaty formally transferred competence over the negotiations of foreign direct investment (FDI) agreements to the EU, which became in theory a unified actor with respect to both outbound and inbound FDI. However, many political and legal ambiguities surround the true extent of the EU's authority and autonomy over foreign investment. This contribution argues that the surge of Chinese FDI into Europe, which is taking place simultaneously with this transition to a new EU foreign investment regime, has the potential to influence the final shape of this regime by exerting both centripetal and centrifugal pressures.
Article
This article analyses the justification for the recent enactment in the European Union (EU) of a regulation establishing a framework for the screening of inward foreign direct investment (FDI). It argues that the new regulation, which constitutes a first step for a more comprehensive EU investment screening system, should not be considered to be exclusively aimed at protecting the internal market and defensive Union or Member State interests. Instead, the regulation has a tangible external economic policy justification and outlook because it can be seen as a starting point to build up, at the Union level, possibilities to limit inward FDI, which in turn can be used by the EU as a bargaining chip in its trade and investment negotiations with economically powerful countries, such as the United States or China, in order to achieve, on the basis of reciprocity, better access of EU investors to foreign markets. Paradoxically, establishing a framework for the screening of inward FDI at the Union level can therefore be seen as serving the EU’s constitutionally enshrined goal to achieve further investment liberalization, rather than as shielding the internal market from undesired external influence. This article analyses the justification for the recent enactment in the European Union (EU) of a regulation establishing a framework for the screening of inward foreign direct investment (FDI). It argues that the new regulation, which constitutes a first step for a more comprehensive EU investment screening system, should not be considered to be exclusively aimed at protecting the internal market and defensive Union or Member State interests. Instead, the regulation has a tangible external economic policy justification and outlook because it can be seen as a starting point to build up, at the Union level, possibilities to limit inward FDI, which in turn can be used by the EU as a bargaining chip in its trade and investment negotiations with economically powerful countries, such as the United States or China, in order to achieve, on the basis of reciprocity, better access of EU investors to foreign markets. Paradoxically, establishing a framework for the screening of inward FDI at the Union level can therefore be seen as serving the EU’s constitutionally enshrined goal to achieve further investment liberalization, rather than as shielding the internal market from undesired external influence. This article analyses the justification for the recent enactment in the European Union (EU) of a regulation establishing a framework for the screening of inward foreign direct investment (FDI). It argues that the new regulation, which constitutes a first step for a more comprehensive EU investment screening system, should not be considered to be exclusively aimed at protecting the internal market and defensive Union or Member State interests. Instead, the regulation has a tangible external economic policy justification and outlook because it can be seen as a starting point to build up, at the Union level, possibilities to limit inward FDI, which in turn can be used by the EU as a bargaining chip in its trade and investment negotiations with economically powerful countries, such as the United States or China, in order to achieve, on the basis of reciprocity, better access of EU investors to foreign markets. Paradoxically, establishing a framework for the screening of inward FDI at the Union level can therefore be seen as serving the EU’s constitutionally enshrined goal to achieve further investment liberalization, rather than as shielding the internal market from undesired external influence.
Article
An Introduction to Statistical Learning provides an accessible overview of the field of statistical learning, an essential toolset for making sense of the vast and complex data sets that have emerged in fields ranging from biology to finance to marketing to astrophysics in the past twenty years. This book presents some of the most important modeling and prediction techniques, along with relevant applications. Topics include linear regression, classification, resampling methods, shrinkage approaches, tree-based methods, support vector machines, clustering, deep learning, survival analysis, multiple testing, and more. Color graphics and real-world examples are used to illustrate the methods presented. Since the goal of this textbook is to facilitate the use of these statistical learning techniques by practitioners in science, industry, and other fields, each chapter contains a tutorial on implementing the analyses and methods presented in R, an extremely popular open source statistical software platform. Two of the authors co-wrote The Elements of Statistical Learning (Hastie, Tibshirani and Friedman, 2nd edition 2009), a popular reference book for statistics and machine learning researchers. An Introduction to Statistical Learning covers many of the same topics, but at a level accessible to a much broader audience. This book is targeted at statisticians and non-statisticians alike who wish to use cutting-edge statistical learning techniques to analyze their data. The text assumes only a previous course in linear regression and no knowledge of matrix algebra. This Second Edition features new chapters on deep learning, survival analysis, and multiple testing, as well as expanded treatments of naïve Bayes, generalized linear models, Bayesian additive regression trees, and matrix completion. R code has been updated throughout to ensure compatibility.
Article
Recent developments suggest that the international economic order is transitioning away from the Neoliberal Order that has flourished for much of the post-Cold War period toward a new Geoeconomic Order. The shift to this new order, which is characterized by a growing ‘securitisation of economic policy and economisation of strategic policy’, will likely see the rules, norms, and institutions of international trade and investment law undergoing significant change. We expose the differences in the underlying logic of these orders, explore how this shift is being driven by the emerging USA–China tech/trade war, and consider the consequences of this transition for global economic governance.
Article
This article examines a particular instance of backlash against economic globalisation – the screening of foreign direct investment in the United States. Although most foreign direct investment is welcome in the United States, specific transactions have aroused suspicion and triggered political backlash by Congress. In fact, successive episodes have reshaped the institutions through which the United States screens foreign direct investment. The recent emergence of China as a foreign investor has posed new political challenges and led to further restrictions. This article explores the circumstances that make congressional backlash to Chinese foreign direct investment more likely, or to use the language of Alter and Zürn in this Special Issue, the ‘triggers’ of congressional backlash. Our findings highlight several patterns, notably that domestic political motives are strongly associated with congressional backlash and that generally the members instigating it do not represent the district in which the investment is located.
Article
I investigate public opinion toward Chinese FDI inflows in advanced economies, comparing attitudes toward such investment with attitudes toward American and European FDI inflows. I am interested in whether concerns with technology transfer (and related job losses) commonly associated with Chinese FDI resonate among the key target audience, namely managers. Accordingly, I expect managers to less strongly support Chinese FDI inflows relative to FDI inflows from advanced economies when they are employed in high R&D industries. I expect both self-interested and socio-tropic motives to drive the split in how managers view Chinese FDI vs. European and American FDI. Because technology transfer occurs in acquisitions, I also expect industry-level exposure to Chinese acquisitions to reinforce the negative joint impact of being a manager and employment in high R&D industries on support for Chinese FDI. Using original survey data from Switzerland, I find robust evidence for my expectations. The findings point to occupational characteristics and the fear of technology transfer as key drivers of opposition to Chinese FDI in advanced economies, and suggest that the demand-side politics of Chinese inward FDI is unique.
Book
Cambridge Core - Political Economy - Merging Interests - by Sarah Bauerle Danzman
Article
An important context for contemporary trade frictions is the emergence, since the 1990s, of a wide range of new forms of market capitalism, of which China’s hybrid market economy is the most significant. Institutional diversity of this kind is a source of strength and dynamism for the global trading system, but it is also the cause of very serious friction. The General Agreement on Tariffs and Trade/World Trade Organization system has dealt with this problem before, but the existing settlement regarding the legitimate boundaries of institutional diversity is under pressure and needs to be revisited. One concept that has been incorporated into World Trade Organization trade defence law (and elsewhere) to help draw these boundaries is the concept of the ‘market distortion’. The concept can be a useful one, but it has so far been interpreted and applied with an inadequate appreciation of its serious conceptual and practical difficulties. The potential result is a system of trade defences targeted in a discriminatory and even punitive manner against heterodox institutional forms, in ways that may excessively disincentivize institutional experimentation. In response, this paper argues for an approach to the interpretation and application of this concept, which proceeds from an understanding of the institutionally embedded character of markets. This does not take the form of a readily available ‘solution’, but rather a messy and evolving set of legal techniques that, in the best case, can form the legal basis of a practical and justifiable approach to the tensions caused by institutional diversity. A toolkit of legal techniques of this kind clearly cannot take the place of a more foundational political settlement of some sort, but it is a necessary accompaniment to it, if we are to preserve the aspiration towards a genuinely non-discriminatory and rules-based global economic order.
Article
After the negotiations for the Transatlantic Trade and Investment Partnership (TTIP) triggered massive public mobilization in the European Union (EU), literature emerged on the novel ‘politicization’ of trade in Europe. To be sure, public salience was high around the TTIP negotiations. However, public salience over EU trade and investment negotiations has varied considerably over the past two decades. The objective of this paper is to stimulate a research agenda explaining such variation. After presenting evidence of variation (over time, across contemporaneous negotiations, and across Member States), we review a diverse set of literature to lay out six complementary explanations for why some trade deals provoke public salience, while others do not: changing nature of trade and investment negotiations; growing discontent with globalization; transformation of the media landscape; institutional changes brought about by the 2009 Lisbon Treaty; the role of the United States; and foreign interference.
Chapter
The phenomenal story of China’s ‘unprecedented disposition to engage the international legal order’ has been primarily told and examined by political scientists and economists. Since China adopted its ‘open door’ policy in 1978, which altered its development strategy from self-sufficiency to active participation in the world market and aimed at attracting foreign investment to fuel its economic development, the underlying policy for mobilizing inward foreign direct investment (IFDI) remains unchanged to date. With the 1997 launch of the ‘Going Global’ policy, an outward focus regarding foreign investment has been added, to circumvent trade barriers and improve the competitiveness of Chinese firms, typically its state-owned enterprises (SOEs). In order to accommodate inward and outward FDI, China’s participation in the international investment regime has underpinned its efforts to join multi-lateral investment-related legal instruments and conclude international investment agreements (IIAs). China began by selectively concluding bilateral investment treaties (BITs) with developed countries (major capital exporting states to China at that time), signing its first BIT with Sweden in 1982. Despite being a latecomer, over time China’s experience and practice with the international investment regime have allowed it to evolve towards liberalizing its IIAs regime and balancing the duties and benefits associated with IIAs. The book spans a broad spectrum of China’s contemporary international investment law and policy: domestic foreign investment law and reforms, tax policy, bilateral investment treaties, free trade agreements, G20 initiatives, the ‘One Belt One Road’ initiative, international dispute resolution, and inter-regime coordination.
Chapter
This chapter engages in an analysis of the political economy of Chinese outward foreign direct investment (COFDI) in ‘One-belt, One-Road’ (OBOR) countries between 2005 and 2014. Research findings yield a couple of interesting results. First, there is strong evidence supporting the resource-seeking motivation behind COFDI to OBOR countries. Secondly, in contrast to previous findings, this study yields some preliminary evidence that COFDI is more likely to seek out countries with low political risks. Thirdly, the results suggest that in addition to going to countries with good political relations with Beijing, COFDI has also been more likely to flow to countries with shared diplomatic interests and agenda with the United States. Taken together, these findings point to the politically driven nature of Chinese investment in OBOR countries and the potentially central role of the state in guiding Chinese investment in the region.
Book
Why do states block some foreign direct investment on national security grounds even when it originates from within their own security community? Government intervention into foreign takeovers of domestic companies is on the rise, and many observers find it surprising that states engage in such behaviour not only against their strategic and military competitors, but also against their closest allies. Ashley Lenihan argues that such puzzling behaviour can be explained by recognizing that states use intervention into cross-border mergers and acquisitions as a tool of statecraft to internally balance the economic and military power of other states through non-military means. This book tests this theory using quantitative and qualitative analysis of transactions in the United States, Russia, China, and fifteen European Union states. It deepens our understanding of why states intervene in foreign takeovers, the relationship between interdependence and conflict, the limits of globalization, and how states are balancing power in new ways. This title is also available as Open Access.
Book
The European Union (EU) has emerged as a key actor in the global investment regime since the 1980s. At the same time, international investment policy and agreements, which govern international investment liberalisation, treatment and protection through investor-to-state dispute settlement, have become increasingly contentious in the European public debate. This book provides an accessible introduction to international investment policy and seeks to explain how the EU became an actor in the global investment regime. It offers a detailed analysis of the EU's participation in all major trade and investment negotiations since the 1980s and EU-internal competence debates to identify the causes behind the EU's growing role in this policy domain. Building on principal-agent and historical institutionalist models of incremental institutional change, the book shows that Commission entrepreneurship was instrumental in the emergence of the EU as a key actor in the global investment regime. It refutes business-centred liberal intergovernmental explanations, which suggest that business lobbying made the Member States accept the EU's growing role and competence in this domain. The book lends support to supranational and challenges intergovernmental thinking on European Integration. This text will be of key interest to scholars, students and practitioners of European and regional integration, EU foreign relations, EU trade and international investment law, business lobbying, and more broadly of international political economy.
Article
Prior international political economy public opinion research has primarily examined how economic and socio-cultural factors shape individuals’ views on the flows of goods, people and capital. This research has largely ignored whether individuals also care about rewarding or punishing foreign countries for their policies on these issues. We tested this possibility by administering a series of conjoint and traditional survey experiments in the United States and China that examined how reciprocity influences opposition to foreign acquisitions of domestic companies. We find that reciprocity is an important determinant of public opinion on the regulation of foreign investments. This suggests the need to consider the policies that other countries adopt when trying to explain public attitudes toward global economic integration.
Book
The European Yearbook of International Economic Law (EYIEL) is an annual publication in International Economic Law, a field increasingly emancipating itself from Public International Law scholarship and evolving into a fully-fledged academic discipline in its own right. With the yearbook, the editors and publisher intend to make a significant contribution to the development of this "new" discipline and provide an international reference source of the highest possible quality. The EYIEL covers all areas of IEL, in particular WTO Law, External Trade Law of major trading countries, important regional economic integration agreements, International Competition Law, International Investment Regulation, International Monetary Law, International Intellectual Property Protection and International Tax Law. In addition to the regular annual volumes, EYIEL Special Issues routinely address specific current topics in International Economic Law. The entry into force of the Lisbon Treaty entails sweeping changes with respect to foreign investment regulation. Most prominently, the Treaty on the Functioning of the European Union (TFEU) now contains in its Article 207 an explicit competence for the regulation of foreign direct investment as part of the Common Commercial Policy (CCP) chapter. With this new competence, the EU will become an important actor in the field of international investment politics and law. The new empowerment in the field of international investment law prompts a multitude of questions. This volume analyzes in depth the new “post-Lisbon situation” in the area of investment policy, provokes further discussion and offers new approaches.
Article
We revisit the classic semiparametric problem of inference on a low dimensional parameter θ0 in the presence of high-dimensional nuisance parameters η0. We depart from the classical setting by allowing for η0 to be so high-dimensional that the traditional assumptions, such as Donsker properties, that limit complexity of the parameter space for this object break down. To estimate η0, we consider the use of statistical or machine learning (ML) methods which are particularly well-suited to estimation in modern, very high-dimensional cases. ML methods perform well by employing regularization to reduce variance and trading off regularization bias with overfitting in practice. However, both regularization bias and overfitting in estimating η0 cause a heavy bias in estimators of θ0 that are obtained by naively plugging ML estimators of η0 into estimating equations for θ0. This bias results in the naive estimator failing to be N−1/2 consistent, where N is the sample size. We show that the impact of regularization bias and overfitting on estimation of the parameter of interest θ0 can be removed by using two simple, yet critical, ingredients: (1) using Neyman-orthogonal moments/scores that have reduced sensitivity with respect to nuisance parameters to estimate θ0, and (2) making use of cross-fitting which provides an efficient form of data-splitting. We call the resulting set of methods double or debiased ML (DML). We verify that DML delivers point estimators that concentrate in a N−1/2 -neighborhood of the true parameter values and are approximately unbiased and normally distributed, which allows construction of valid confidence statements. The generic statistical theory of DML is elementary and simultaneously relies on only weak theoretical requirements which will admit the use of a broad array of modern ML methods for estimating the nuisance parameters such as random forests, lasso, ridge, deep neural nets, boosted trees, and various hybrids and ensembles of these methods. We illustrate the general theory by applying it to provide theoretical properties of DML applied to learn the main regression parameter in a partially linear regression model, DML applied to learn the coefficient on an endogenous variable in a partially linear instrumental variables model, DML applied to learn the average treatment effect and the average treatment effect on the treated under unconfoundedness, and DML applied to learn the local average treatment effect in an instrumental variables setting. In addition to these theoretical applications, we also illustrate the use of DML in three empirical examples. This article is protected by copyright. All rights reserved
Article
A central question in the international and comparative political economy literatures on globalization is whether economic integration increases worker insecurity in advanced economies. Previous research has focused on the role of international trade and has failed to produce convincing evidence that such a link exists. In this article, we argue that globalization increases worker insecurity, but that foreign direct investment (FDI) by multinational enterprises (MNEs) is the key aspect of integration generating risk. FDI by MNEs increases firms' elasticity of demand for labor. More-elastic labor demands, in turn, raise the volatility of wages and employment, all of which tends to make workers feel less secure. We present new empirical evidence, based on the analysis of panel data from Great Britain collected from 1991 to 1999, that FDI activity in the industries in which individuals work is positively correlated with individual perceptions of economic insecurity. This correlation holds in analyses accounting for individual-specific effects and a wide variety of control variables.
Article
Chernozhukov, Chetverikov, Demirer, Duflo, Hansen, and Newey (2016) provide a generic double/de-biased machine learning (DML) approach for obtaining valid inferential statements about focal parameters, using Neyman-orthogonal scores and cross-fitting, in settings where nuisance parameters are estimated using a new generation of nonparametric fitting methods for high-dimensional data, called machine learning methods. In this note, we illustrate the application of this method in the context of estimating average treatment effects (ATE) and average treatment effects on the treated (ATTE) using observational data. A more general discussion and references to the existing literature are available in Chernozhukov, Chetverikov, Demirer, Duflo, Hansen, and Newey (2016).
Article
How are policy competences allocated between different actors? This article contributes to the literature on institutional development through an in-depth case-study of the conditions under which the competence over the negotiation of agreements on foreign direct investment (FDI) was transferred from the national level to the European Union (EU) in the 2009 Lisbon Treaty. Most analysts assume that this competence shift was a rationally designed delegation, intended to maximize European bargaining power in international investment negotiations and conceived as an important element of a teleological drive to make the EU a meaningful external actor. This article tells a different story - one where the competence shift happened by stealth as a result of a combination of neo-functionalist Commission entrepreneurship and historical accident, against the preferences of the Member States. The article also assesses whether the conditions under which the competence was transferred have implications for the implementation of the new policy. © 2017 University Association for Contemporary European Studies and John Wiley & Sons Ltd.
Article
This article reviews scholarly research on the political economy of foreign direct investment (FDI) over the past 20 years. FDI research during this period reflects FDI's rapid growth, particularly in developing countries, and the emergence of intense competition among countries to attract investments. Countries have grown more open to FDI as evidenced by FDI deregulation, generous financial investment incentives, and the adoption of international agreements. Although extensive research shows that multinational corporations prefer to invest in countries with strong property rights protections, whether incentives and international agreements help countries attract FDI remains contested. Scholars can advance research by disaggregating FDI into multinational firms' specific production activities because the scope for countries to compete for FDI and firms' sensitivity to property rights vary widely. More generally, scholars should recast the separate study of trade and FDI into the study of global production in which trade and FDI are inextricably linked.
Book
There is extraordinary variation in how governments treat multinational corporations in emerging economies; in fact, governments around the world have nationalized or eaten away at the value of foreign-owned property in violation of international treaties. This even occurs in poor countries, where governments are expected to, at a minimum, respect the contracts they make with foreign firms lest foreign capital flee. In The Shield of Nationality, Rachel Wellhausen introduces foreign-firm nationality as a key determinant of firms’ responses to government breaches of contract. Firms of the same nationality are likely to see a compatriot’s broken contract as a forewarning of their own problems, leading them to take flight or fight. In contrast, firms of other nationalities are likely to meet the broken contract with apparent indifference. Evidence includes quantitative analysis and case studies that draw on field research in Ukraine, Moldova, and Romania.
Article
There are over 1,000 McDonald's on French soil. Two Disney theme parks have opened near Paris in the last two decades. And American-inspired vocabulary such as "le weekend" has been absorbed into the French language. But as former French president Jacques Chirac put it: "The U.S. finds France unbearably pretentious. And we find the U.S. unbearably hegemonic." Are the French fascinated or threatened by America? They Americanize yet are notorious for expressions of anti-Americanism. From McDonald's and Coca-Cola to free markets and foreign policy, this book looks closely at the conflicts and contradictions of France's relationship to American politics and culture. Richard Kuisel shows how the French have used America as both yardstick and foil to measure their own distinct national identity. They ask: how can we be modern like the Americans without becoming like them? France has charted its own path: it has welcomed America's products but rejected American policies; assailed America's "jungle capitalism" while liberalizing its own economy; attacked "Reaganomics'" while defending French social security; and protected French cinema, television, food, and language even while ingesting American pop culture. Kuisel examines France's role as an independent ally of the United States--in the reunification of Germany and in military involvement in the Persian Gulf and Bosnia--but he also considers the country's failures in influencing the Reagan, Bush, and Clinton administrations. Whether investigating France's successful information technology sector or its spurning of American expertise during the AIDS epidemic, Kuisel asks if this insistence on a French way represents a growing distance between Europe and the United States or a reaction to American globalization.
Article
The main purpose of this paper is to investigate and analyse foreign direct investment (FDI) regimes and their screening processes, institutional frameworks, and business environments in world trade. China's FDI regime is specifically compared with that of the United States, Australia, Canada, and the United Kingdom. Other countries (France, Germany, Japan, Hong Kong, and Switzerland) were also included in the discussion to evaluate their regulatory and investment issues. By using interdisciplinary literature, secondary data, and research surveys and reports from multilateral institutions, the study investigates the changing profile of FDI regimes in world trade. The paper reveals that China's FDI regime has embraced significant changes to attract foreign investment. Currently, the Chinese market is open yet restricted in its own regulatory environment and institutional hurdles. Investment regimes in the United States, Australia, Canada, and the United Kingdom continue to change to attract foreign investment that is critical to their economies. We believe that more country- and industry-specific studies are needed to investigate FDI regimes and their institutional frameworks. In today's world trade, China is particularly an interesting case study since the country aggressively attracts foreign investment while keeping its hybrid economy. Policymakers, multinational corporations (MNCs), governments, and researchers need to pay attention to today's changing FDI regimes because of growth opportunities and MNC expansion. The study provides useful discussion and meaningful implications that can be used by policy analysts and practitioners worldwide.
Article
A method proposed by Ahnert for magnitude-frequency analysis amounts to fitting an exponential distribution: the parameters can be specified directly as the sample mean and the known minimum value. When applied to precipitation data, the most obvious comparison is with the more general gamma distribution: although fitting is technically more awkward, methods publicised here allow estimation of parameters by maximum likelihood and computations for probability plots. Calculated recurrence intervals are sensitive to variations in plotting position formulae: the Hazen formula is recommended for data with marked skew. -from Author
Article
How does organized labor shape restrictions on inward foreign direct investment (FDI)? Distributional consequences, drawn from heterogeneous firms theory, suggest that although inward FDI benefits a subset of workers, a greater number of workers is hurt by inward FDI, leading labor in the aggregate to support restrictions on inward FDI. I argue that the political power of labor is determined by the position of labor vis-à-vis other actors in society and the unity of labor’s policy preferences. The share of the labor force that is unionized determines the relative importance of labor interests, while union concentration determines whether the aggregate policy position of organized labor is unified or fragmented. In an analysis of 19 developed countries from 1971 and 2000, I find evidence that greater union density leads to more restrictions on inward investment when unions are concentrated.
Article
A great deal of political economy scholarship has focused on how countries can attract foreign direct investment (FDI), and the effects of FDI on growth and political stability. A related topic that has received almost no attention, however, is that of divergent political reactions to inflows of FDI in the countries receiving investments. This is an oversight, because inward FDI flows are not equally welcomed by the host country and, in fact, often encounter strong political opposition. We study this phenomenon by examining political opposition to attempts by Chinese companies at mergers and acquisitions (M&As) with US firms. This is especially important given rapidly expanding Chinese M&A activity. We hypothesise that although most legal barriers to foreign M&As are based on national security considerations, objections on these grounds are often vehicles through which to channel other grievances, and that economic distress and reciprocity are also key drivers of political opposition. To test this theory, we constructed an original dataset of 569 transactions that occurred between 1999 and 2014 involving Chinese acquirers and American targets. We find that there is more likely to be opposition to Chinese M&A attempts in security sensitive industries, economically distressed industries, and sectors in which US companies faced restrictions in China’s M&A markets.
Article
Although inward foreign direct investment (FDI) has many benefits for a country as a whole, like trade, it is a source of competition for producers in the host country, with concomitant effects on labor markets. The entrance of foreign multinationals increases demand for skilled labor at the expense of unskilled labor, and also increases the elasticity of demand for labor because multinationals are able to shift production across borders. This raises the question of whether or not labor has an impact on policy toward inward FDI. I suggest that organized labor is a key determinant of the influence of labor on inward FDI restrictions. Not only do unions mitigate the collective action problem facing labor, but unionized workers, regardless of skill level, have incentives to support restrictions on inward FDI because rising elasticity of demand restricts bargaining power. I expect that higher levels of unionization will lead to greater restrictions on inward FDI. I find support for this hypothesis in an analysis of U.S. industry-level formal restrictions on inward FDI between 1981 and 2000. Industry skill intensity, a proxy for the distributional consequences of FDI for labor, does not explain variation in barriers to inward FDI, suggesting that the confluence of interests and influence is necessary for labor to influence policy.
Article
Despite the central role of foreign direct investment (FDI) in global economic integration, we lack explanations for why countries restrict FDI inflows. This article analyzes the sources of FDI liberalization using a comprehensive new data set of national foreign ownership restrictions spanning over 90 countries for the period 1970–2000. Analyses of this data show that democratization contributes to greater FDI openness. Democratization elevates the political influence of labor, the primary beneficiary of unrestricted FDI inflows. Democracies restrict six percent fewer of their manufacturing and service industries as compared to nondemocracies. This finding is robust to several controls for alternate explanations including economic crises, coercion, and diffusion; alternate measures of both democracy and foreign ownership restrictions; and a variety of model specifications. This article elucidates the political economy foundations of the contemporary world economy.
Article
We analyze whether foreign direct investment (FDI) has contributed to the typically wide income gaps in five Latin American host countries. We perform country-specific and panel cointegration techniques to assess the long-run impact of inward FDI stocks on income inequality among households in Bolivia, Chile, Colombia, Mexico and Uruguay. The panel cointegration analysis reveals a significant and positive effect on income inequality. Furthermore, FDI contributed to widening income gaps in all individual sample countries, except for Uruguay. Our findings are robust to the choice of different estimation methods. There is no evidence for reverse causality
Article
The Committee on Foreign Investment in the United States (CFIUS) is comprised of 12 members representing major departments and agencies within the federal Executive Branch. While the group generally operates in relative obscurity, the proposed acquisition of commercial operations at six U.S. ports by Dubai Ports World in 2006 placed the group's operations under intense scrutiny by Members of Congress and the public. Prompted by this case, some Members are questioning the ability of Congress to exercise its oversight responsibilities given the general view that CFIUS's operations lack transparency. Other Members are revisiting concerns about the linkage between national security and the role of foreign investment in the U.S. economy. Some Members of Congress and others argue that the nation's security and economic concerns have changed since the September 11, 2001 terrorist attacks and that these concerns are not being reflected sufficiently in the Committee's deliberations. In addition, anecdotal evidence seems to indicate that the CFIUS process may not be market neutral, instead a CFIUS investigation of an investment transaction may be perceived by some firms and by some in the financial markets as a negative factor that adds to uncertainty and may spur firms to engage in behavior that is not optimal for the economy as a whole. Since some Members of Congress focused attention on the Dubai Ports World transaction, more than two dozen measures on foreign investment have been introduced. These measures reflect various levels of unease with the broad discretionary authority Congress has granted CFIUS. As a result, most measures would place new reporting requirements on CFIUS and strengthen Congress's ability to exercise oversight over CFIUS through the federal agencies that comprise the Committee.
Article
The decade of the 1990s was characterized by widespread liberalization of laws and regulations affecting inflows of foreign direct investment in developing countries. Using a data base supplied by UNCTAD, this article employs a cross-sectional regression methodology to analyze the determinants of liberalization of foreign direct investment policies in 116 developing countries from 1992 to 2001. Ninety-five per cent of the changes in such policies over the decade (1,029 of 1,086) were liberalizing rather than restrictive. Two possible explanations of liberalization are suggested: policy makers' beliefs that attracting more foreign direct investment is in the best interests of their countries, and external pressure to adopt neoliberal economic policies either from the dominant power (the United States) or international organizations such as the World Bank or International Monetary Fund. Results provide strong support for the "rational" decision (or "opportunity costs of closure") argument and only limited support for the external pressure thesis. Country size, level of human resource capabilities and trade openness are found to be the primary determinants of the propensity to liberalize.
Book
Although a vital part of the US economy, foreign direct investment (FDI) in the United States periodically raises public and congressional alarms--as witnessed during Dubai Ports World's recent bid to acquire US port operations and Chinese firm CNOOC's attempt to buy US energy firm Unocal. Drawing fire from Congress are the Exon-Florio provisions of US law, which enable the president to block a foreign acquisition that threatens national security. This important new book finds that many proposed reforms risk harming the US economy without enhancing national security. The authors propose ways to strengthen the current interagency review of deals, including an improved process for reporting to Congress.
Article
A nation that lacks physical objects like factories and roads suffers from an object gap. A nation that lacks the knowledge used to create value in a modern economy suffers from an idea gap. Object gaps are emphasized by mainstream economists who make use of formal models and statistical hypothesis tests. Idea gaps are emphasized by dissident economists who make use of a diverse body of evidence and avoid formal models. Economists need to use the formal models from the first approach and the diverse evidence from the second to fully appreciate the importance of idea gaps in economic development.
Article
Based on industry-level data of seventeen OECD countries we examine FDI as a potential channel for knowledge diffusion. We find that FDI-receiving countries benefit strongly from FDI-related knowledge spillovers. We do not find evidence for positive outward-FDI-related technology sourcing effects.
Article
Do multinational companies generate positive externalities for the host country? The evidence so far is mixed varying from beneficial to detrimental effects of foreign direct investment (FDI) on growth, with many studies that find no effect. In order to provide an explanation for this empirical ambiguity, we formalize a mechanism that emphasizes the role of local financial markets in enabling FDI to promote growth through backward linkages. Using realistic parameter values, we quantify the response of growth to FDI and show that an increase in the share of FDI leads to higher additional growth in financially developed economies relative to financially under-developed ones.
Article
This paper examines the interactions between Foreign Direct Investment (FDI), inequality, and growth, both from an empirical and a theoretical point of view. Using a panel of 119 developing countries, we observe that FDI promotes both inequality and growth, and tends to reduce the share of agriculture to GDP in the recipient country. We then set up a growth model of a dual economy in which the traditional (agricultural) sector uses a diminishing returns technology, while FDI is the engine of growth in the modern (industrial) sector. The main predictions of the model are consistent with the stylized facts observed in the data.
Article
Despite the increased attention on the impacts of globalisation, there has been little empirical investigation into the impact of multinational firms on the domestic labour market and in particular wage inequality, this is in spite of a rapid increase in foreign direct investment (FDI) at around the same time of rising inequality. Using UK panel data, this paper tests whether inward flows of FDI have contributed to increasing wage inequality. Even after controlling for the two most common explanations of wage inequality, technology and trade, we find that FDI has a significant effect upon wage inequality, with the overall impact of FDI explaining on average 11% of wage inequality.