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International Trade & FDI:
A Focus on FTAA
Mary A. Marchant (U. of KY)
Tigran A. Manukyan (U. of KY)
Won Koo (No. Dakota State U.)
Overview




Recent Trends in Trade & FDI
Research Objectives
Theoretical Model
Empirical Results
Recent Trends in Trade & FDI

Evolving importance of the export
market for


U.S. agriculture
FTAA
Exports fell sharply during the financial
crisis of the 1980s, recovering late in the
decade as interest rates fell. They fell again
late in the 1990s as the “Asian Flu” gripped
many client nations.
Recent Trends in Trade & FDI


Changing composition of U.S.
agricultural export products
From bulk to processed foods
Bulk commodity exports dominated agricultural exports
until recent years when value added sales began to increase.
---- The FTAA (35 Countries)
---- U.S. Agricultural Exports to FTAA
25
20
B illion D ollars
T o ta l
15
10
C a na da , M e xic o a nd B ra zil
5
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Y e ar
U.S. Ag. Exports to FTAA and to Canada, Mexico, and Brazil (Value)
--- Consumer-Oriented Products
12.0
10.0
B illio n D o lla rs
FTA A
8.0
6.0
C a n a d a , M e x ic o , B r a z il
4.0
2.0
0.0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001 Year
--- U.S. Agricultural Exports to FTAA and to Canada, Mexico and Brazil
( CONSUMER-ORIENTED PRODUCTS )
12. 0
10. 0
B illion D ollars
F T AA---T o ta l
8. 0
B ra zil
M e x ico
6. 0
4. 0
C a na da
2. 0
0. 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Year
U.S. Ag. Imports from FTAA and from Canada, Mexico, and Brazil (Value)
----- Consumer-Oriented Products
18. 0
16. 0
U .S . I m p o rts F ro m F T A A
B illio n D o lla rs
14. 0
12. 0
10. 0
8. 0
6. 0
4. 0
U . S . I m p o r t s fr o m C a n a d a ,
M e x ic o , B r a z il
2. 0
0. 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Year
U.S. Ag. Imports from FTAA (Value)
--- Consumer-Oriented Products
18.0
16.0
B illion D ollars
F T AA---T o ta l
14.0
12.0
10.0
B ra zil
8.0
M e xic o
6.0
4.0
2.0
0.0
1989
C a na da
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001 Year
U.S. Ag. Trade with FTAA and with Canada, Mexico, and Brazil (Value)
--- Consumer-Oriented Products
18. 0
16. 0
U .S . I m p o rts F ro m F T A A
14. 0
B illion D ollars
12. 0
U .S . I m p o rts fro m C an ad a,
M e x ic o , B razil
10. 0
8. 0
6. 0
U .S . E x p o rts T o C an ad a,
4. 0
M e x ic o , B razil
U .S . E x p o rts to F T A A
2. 0
0. 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001 Year
Recent Trends in Trade & FDI

Changes in foreign market assess—
exports vs. FDI
140
U .S . D ollars (B illions)
120
100
Figure 4. U.S. Foreign Affiliate Sales (FDI Sales) and Exports of Processed Food Products
80
60
40
20
0
1984
1986
1988
1990
F D I S a le s
1992
1994
E x p o rts
1996
Recent Trends in Trade & FDI



Evolving importance of the export
market for U.S. agriculture
Processed foods
FDI
Research Objectives
To identify


Export & FDI determinants for FTAA
countries
Relationship between exports & FDI–
substitutes or complements?
Data
Processed foods, SIC-20



3 FTAA countries—Canada, Mexico, and
Brazil
Annual Data
Sources—Commerce, ERS, IMF, BEA,
FTAA Empirical Results
FDI was influenced by





Exchange rates (+)
GDP (+)
Exports (+)
Interest rates
Compensation
FTAA Empirical Results
Exports were influenced by




Export prices (-)
Exchange rates (-)
GDP
FDI (+)
FTAA Conclusions


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Importance of exports, processed foods, &
FDI for the U.S. & FTAA
Empirical Results support a complementary
relationship between exports & FDI in FTAA—
Canada, Mexico & Brazil
Consistent with results of Malanoski, Handy &
Henderson; Somwaru & Bolling