Comment

Abstract

This paper provides all that one is accustomed to expect from Greenaway; a fine blend of theory, facts and incisive analysis. Those uninitiated in the economics of foreign direct investment (FDI) will find in this paper a succinct discussion of the nature, extent and objectives of both the incentives that host countries offer to foreign firms and the complex set of regulations they impose on their operations. This is followed by an elegant theoretical analysis of the economic costs that the system of incentives and regulations impose on the host countries, illustrated in the context of local-content requirements and export obligations imposed on foreign firms. Greenaway’s analysis leads him to conclude that TRIMs distort trade and impose substantial welfare costs on the host countries.