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Abstract
Foreign direct investment (FDI) is known
as a very relevant driver of economic growth and has
found increased attention in recent trade research.
Existing theories differ, however, in their conclusion
regarding the relation between trade in goods and FDI:
they appear to be either complements or substitutes
depending on the theory applied and specific country
conditions. Benefits or losses for individual member
countries resulting from these different relationships are
relevant for evaluating the effects of regional trade areas
as established by the Euro-Mediterranean Partnership.
This paper offers an empirical analysis of the connection
between trade and FDI flows in the agribusiness sector
in the context of the Euro-Mediterranean partnership. It
contributes to the limited literature in this area by
providing an overview on relevant theories and their
conclusion on the relationship between trade and FDI.
Determinants implied by the single theories are
identified and reasonable proxies derived for the carried
out econometric analysis. The empirical analysis shows
mixed evidence on the complementary or substitutive
relationship of FDI and trade in agricultural goods. For
comparison and better interpretation of determinants’
impacts identified by the econometric analysis, a further
analysis between the EU15 and the Mercosur countries
is carried out. Finally, further research needs in this
area of trade analyses are identified for the specific case
of the Euro-Mediterranean Partnership.