Factor Mobility, Agriculture, Environment and Quantitative Studies
Edited by Miroslav N. Jovanović
Chapter 17: Policy Liberalisation and US Integration with the Global Economy: Trade and Investment between 1980 and 2006
1 Gary Hufbauer and Matthew Adler 1 INTRODUCTION Over the last three decades the global economy has expanded remarkably. Nominal world GDP increased four times, but world bilateral trade flows grew more than sixfold, while the stock of foreign direct investment (FDI) has expanded roughly 20 times. US trade and investment with the world have likewise grown at a brisk pace. US two-way trade has grown by more than 500 per cent in nominal terms and the US two-way FDI stock has grown by over 1,100 per cent since 1980. The rates of US trade and investment growth far outpace US GDP growth, which has seen a nominal increase of about 370 per cent over the period.2 The sources of trade and investment growth are well known – general economic expansion, policy liberalisation, and better communications and technology – but the impact attributable to each source is unclear. In this chapter we attempt to identify the contributing factors to US trade and investment growth. Our primary motivation is to determine the impact of policy liberalisation so that we can have a better sense about the future course of trade and investment. To draw conclusions we rely on simple estimation procedures: a partial equilibrium model to analyse US trade growth, and stylised facts combined with an unorthodox calculation method to examine US FDI growth. Admittedly, our estimates are rough, but we believe they give a general sense of the impact of policy liberalisation and other sources of trade and investment growth. Our...
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