International Commercial Interests and Manufacturers’ IFDI Policy Preferences

Wu Qisheng(吴其胜)  
Institute of International Relations, Shanghai Academy of Social Sciences, Shanghai, China  
Abstract: Similar to the cross-border flow of commodities through trade, the global  
allocation of capital and the globalization of manufacturing are also subject to important  
domestic political influence. By increasing demand for production factors and supply of  
products, the inflow of IFDI will increase competitive pressures facing manufacturers in the  
host country. This effect is similar to the import of goods. As such, in the face of external  
competitive pressures, the host country’s manufacturers will oppose the inflow of foreign capital  
like they oppose the import of commodities unless restrictive measures are introduced. However,  
as revealed by the analysis on the attitudes of US semiconductor, renewable energy and steel  
manufacturers toward IFDI since the 1980s, whether or not the manufacturers of a host country  
will call for restrictive or discriminatory policy against IFDI is largely influenced by the  
magnitude of their commercial interests in the source country of investment. A major factor of  
such influence is the potential reaction of the source country. Specifically, when a manufacturer  
has significant commercial interests in the source country of investment, this manufacturer is  
more likely to have an open policy preference toward direct investment from this country, and  
vice versa.  
Keywords: IFDI policy, international interests, manufacturers, IFDI policy preferences  
JEL Classification Code: F23
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