Publications
Publications
- 2009
Regional Trade Integration and Multinational Firm Strategies
By: Pol Antras and C. Fritz Foley
Abstract
This paper analyzes the effects of the formation of a regional trade agreement on the level and nature of multinational firm activity. We examine aggregate data that captures the response of U.S. multinational firms to the formation of the ASEAN free trade agreement. Observed patterns guide the development of a model in which heterogeneous firms from a source country decide how to serve two foreign markets. Following a reduction in tariffs on trade between the two foreign countries, the model predicts growth in the number of source-country firms engaging in foreign direct investment, growth in the size of affiliates that are active in reforming countries both before and after the tariff reduction, and an increase in the extent to which the sales of affiliates in reforming countries are directed towards other reforming countries. Analysis of firm-level responses to the creation of the ASEAN free trade agreement yields results that are consistent with these predictions.
Keywords
Trade; Foreign Direct Investment; Globalized Economies and Regions; Multinational Firms and Management; Growth and Development Strategy; Agreements and Arrangements; Southeast Asia; United States
Citation
Antras, Pol, and C. Fritz Foley. "Regional Trade Integration and Multinational Firm Strategies." NBER Working Paper Series, No. 14891, April 2009.