Trade and Investment Issues in the New Millennium Round
New Horizons in International Business series
Edited by Alan M. Rugman and Gavin Boyd
Chapter 4: Corporations and structural linkages in world commerce
John B. Davis and Joseph P. Daniels The Millennium Round of multilateral negotiations under the auspices of the World Trade Organization (WTO) confronts international trade and investment issues that are more complex and intractable than those in past rounds on account of increasing structural and policy interdependencies between the industrialized nations. Negotiators will have to think not only in terms of trade and investment between separate nations but also in terms of a system of production that operates across nations. In previous rounds, liberalizing international trade dominated the agendas. But international trade and investment have become more highly interlinked in the last decade, so that it has become difﬁcult to consider trade liberalization apart from capital ﬂows. At the same time, the issue of liberalizing international ﬁnancial ﬂows has been complicated by the massive expansion in the 1990s of portfolio capital ﬂows and by ﬁnancial crises in Asia and elsewhere. This chapter consequently examines international trade and investment linkages in terms of long-term structural change, tying this to corporate strategies responding to and underlying this change. Our principal subject is the theory of international production and the emerging system of international production, and we comment on policy initiatives regarding trade and investment generated by increased recognition of their interlinked character. International production has been investigated within at least six branches of theory: international capital movements, trade, location, industrial organization, innovation, and the ﬁrm (Cantwell et al., 1986). Various theories of international production investigate different questions posed in theoretical branches...
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