Foreign Direct Investment and Regional Trade Liberalization: A Viable Answer for Economic Development?

Regional trade liberalization and foreign direct investment (FDI) have proliferated in recent decades. Many believe that free trade and FDI facilitate economic development, and developing countries have been encouraged to participate in free trade agreements (FTAs) and accept FDI to meet their development objectives. This article considers whether free trade and FDI may replace the role of the state in facilitating industries for development and promote economic development without initial economic welfare losses associated with state industrial promotion and trade protection. The article also considers how recent developments in the regulatory environment concerning FTAs and FDI affect the development interest of developing countries.