Статья опубликована в журнале, рекомендованном ВАК «Экономика и предпринимательство», июнь 2014 http://www.intereconom.com/archive/216.html
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Рыбалко А.Н. Особенности регулирования инвестиционной политики государств: через верхи истории до наших дней // Journal «Economy and Entreprenuership».— №5. — vol.2.- Москва, 2014
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This article presents the features of investment policy of the countries, the main indicator of which is the prevalence of selected state strategy: protectionism or free trade. The advantages and disadvantages of these strategies in certain conditions of State`s development are considered.
The principle of free trade and the principle of fair trade are demarcated and defined. The modern trends in the field of investment policy are considered and presented.
investment policy, protectionism, free trade, fair trade, investment appeal, investment climate.
The relevancy of the research is confirmed by modern trends of economic policy on the world stage, expressed in the creation of a single economic space, and Russia’s WTO accession. As the category of «investment appeal» may be interpreted in a causal relationship with the investment policy, as areas of further studies are possible: the identification of new factors influencing the attractiveness of a particular region, account environmental component and socialization of local residents in the new conditions.
The process of developing the national investment policy is increasingly focused on new development strategy. Most States rush to attract and encourage foreign investment in the interests of strengthening productive capacity and sustainable development. At the same time, many countries are strengthening regulation of foreign investments, using an industrial policy in the strategic sectors, in terms of the selection and monitoring and scrutinizing of international mergers and acquisitions. The risk remains that some of these measures are taken protectionist purposes.
The process of development of international investment policy is in transition. By the end of 2012 the regime of international investment agreements (IIA) consisted of 3 196 agreements . Now countries are increasingly prefer not bilateral, but regional approach to elaborating norms and rules in the field of IIA and include elements of sustainable development.
There are rules of regulation of the national financial markets, which can be divided into two types. The first type involves the regulation mainly realizing by public authorities, and a small part of the responsibilities for supervision, control and establish the rules of conducting transactions is transferred to the associations of professional participants of the market, which are self-regulating organizations (for example, in Russia, France).
The second type involves the transfer of the maximum possible volume of powers of self-regulating organizations, but the government retains the basic control functions and the possibility at any moment to intervene in the process of self-regulation (for instance, The UK).
In the vast majority of countries the degree of centralization and rigidity of regulation varies between these two extreme concepts. The structure of state bodies, regulating the market, depends on market model adopted in the country (Bank, non-Bank), the degree of centralization in the country (in Federal countries some of the powers transferred to the territories, for example in the US – to States, in Germany — to lands).
The investment policy of a particular state is implemented in the framework of the national foreign economic policy. Its specificity depends on the content and objectives of the prevailing direction of foreign trade policy – of import or export policy, and on the ratio between the trends of the foreign trade policy — between protectionism and liberalization.
Between protectionists and defenders of free trade there is a long-standing controversy. Mercantilista first applied to the analysis of foreign trade and saw in it the source of wealth of the state, were supporters of protectionism — a system of measures aimed at stimulating the national economy and its protection from foreign competition. The first economists who advocated free trade, became the French physiocrats, who denied the productive role of trade in increasing the wealth of the nation. The most consistent defenders of economic liberalism in General and international trade in particular are English classics, not only developed a coherent theory of foreign trade, but also offer a specific policy in this area. In the XX century as a result of wars and economic crises have been significant protectionist ideology and practice, and currently it is one of the important elements of international economic relations.
The principle of freedom of trade appeared and developed as a response to protectionist measures of the state in different periods of national economic development, starting from the epoch of the initial accumulation of capital and ending time of creation of national industry in the backward countries. Naturally, in this principle, along with the criticism of protectionism provides evidence of the benefits of free trade.
Recommendations of supporters of “free trade” contributed to the economic growth and prosperity of many countries embarked on the path to an open economy.
The movement of Paradero originated in England in the last third of the XVIIIth C. and was connected with the events there the industrial revolution. The struggle of the English Paradero was directed against agricultural duties, supported by high prices for agricultural products, which has hampered the development of factory production, and also to the reduction of customs duties in mutual trade with other countries, which would increase the export of British goods abroad. Under the pressure of Paradero in 20’s XIX century in England was realized the reform of the customs system, which have been abolished or significantly reduced customs duties for many goods. In the middle of the XIX century freetraders swept to victory in England, which greatly helped to make it to this time in the most developed country of the world. In the second half of the XIX century trends freetraders began to appear in the trade policy of France (1852 — 1870), Russia (1850 — 1860) and other countries .
In the XX century after the second world war, the removal of obstacles to free exchange contributed to an unprecedented economic and social development of most countries, and particularly those, which went towards the liberalization of foreign trade (creation of free trade areas, customs unions, regional markets). Conversely, countries that embarked on the path of autarky, protect its economy from the influence of foreign competition, had time to change course and spend more or less profound reform of the foreign economic relations aimed at the release of external trade from excessive state interference .
One should distinguish between the principle of “free trade” and the principle of “fair trade”. According to the principle of free trade, public policy is the opposite of protectionism policy, i.e. market is opened to foreign goods, as well as foreign capital in the country. However, this policy and the uncontrolled influx of foreign goods, especially at a lower price, i.e. goods which compete with national products, retreating either quality or price, or, according to these two criteria simultaneously, which can certainly cause undermining of national production and the national economy as a whole. The policy of fair trade means that the state, through the measures of the customs regulation, establishing quotas, tariffs, and the introduction of legislative restrictions supports necessary for the country “balance” between the quantity of imported and produced production in the country. Through these measures, so-called “Golden mean” is achieved, and the market of the country does not suffer from import and overabundance of foreign goods. But this position is considered by the manufacturer, how a complex of these measures influences the market of goods and services of a particular country.
From the position of the buyer the opposite trend is observed: the limitation of the import of foreign goods, stimulating firms-manufacturers of a country to create products of appropriate quality at the best price, leads to strengthening of the monopolies and the lack of competition, and, as a result, the buyer has to buy the goods of a certain quality (sometimes second to foreign analogues) at higher prices. Protectionism in the long run undermines the foundations of the national production, because it weakens the pressure of the global market, necessary for the development of entrepreneurial initiative. As a result, routine prevails than innovation and progress, reluctance to part with the acquired privileges and revenues. Also protectionism raises the risk of a “chain reaction”, because after protection of certain industries from the adverse effects of the competitive environment of the market, soon there might be a necessity to protect others.
The benefits of free trade is quite versatile and are proved both theory and practice .
First, free trade can improve the welfare of trading Nations, as it opens up the possibility of international specialization of production and exchange on the basis of the principle of comparative advantage.
Second, free trade facilitates the development of competition and supports the spirit of innovation, not only among domestic producers, but also in relations with other countries. This ultimately contributes to the quality of manufactured products.
Thirdly, free trade opens opportunities for market expansion and, consequently, the international concentration of production and mass production of goods that benefit consumers.
Fourthly, free trade is the basis for the optimization of distribution of production resources between countries and such international combinations, which significantly increases the efficiency of their use.
Criticism of protectionism has been conducted to identify the negative aspects of the policy of protection of the national economy from foreign competition. The principle of protectionism along with the said shortcomings has a number of advantages that make the policy of government control over foreign trade attractive for many countries. The most common cause of restrictions on foreign trade is the fact that governments think in terms of national interests and not the interests of humanity as a whole. For protectionism usually promoted as socio-political and economic arguments.
Socio-political advantages of protectionism are to maintain state security of the country, which in the case of rejection of protectionist measures will be jeopardized narrow specialization of the economy. The latter puts the country at high risk not only in case of war, but in the periods of aggravation of international relations. Therefore, the country should develop strategic industries, primarily agriculture and food industry, as well as the sectors, that are necessary for national defense (metallurgy, some kinds of chemical industry and so on) .
Secondly, protectionism is a chance to save with it some social classes and activities (e.g., the peasantry, the traditional national crafts), to prevent depression and recession (for example, in the coal industry and so on).
Economic arguments in defense of protectionist measures, which would make sense, are mainly for reasons of maximization of real income, owing to their use .
The first argument is — with the help of import duties country could improve the terms of trade and increase economic benefits. However, this is possible only in the situation when the demand is more elastic than the supply, and then the growth rates will have largely on the manufacturer, and the income from duties will replenish the state budget.
The second argument is that protectionist measures protect the industry at the stage of its origin and growth. For the first time this argument was put forward by A. Hamilton (USA) at the end of the XVIII century and developed by F. Liszt in XIXc. In his work «The national system of political economy” (1841) F. Liszt outlined the evolution of society from the state of savagery to agroindustrial-trading company, when the nation is becoming «integrated» and «normal.» Protectionism serves as a tool for achievement of this stage, protecting infant industry of the national economy. However, according to F. Liszt, protectionism should extend only to industry, to be temporary (up until a growing business will gain strength and will be able to effectively compete with foreign producers) and moderate (countervailing duties). Experience shows, however, that the protection of such productions in practice, is difficult. Nobody knows when it should stop protectionism, and this means that there is a risk of preservation of protectionist measures for many decades and even centuries. It is known, for example, that the Americans back in the XVIII century have imposed on imports of industrial goods a number of fees that have been preserved to our days.
The third economic argument in defense of protectionism becomes its role in increasing employment of national resources. This idea was first formulated by J. Keynes’s in his work “Treatise on money” (1930), and later developed his work “General theory of employment, interest and money” (1936). J. Keynes believed that the economic system is not able automatically to achieve full employment. In this regard, he proposed to reckon with the fact that the promotion of exports and limiting imports by protectionist measures will be beneficial impact on employment, as it will increase aggregate demand for products of national producers. However, the success of such a policy is unlikely, if it will be used not by one country but several. Stimulation of its export earnings by reducing import from other countries sooner or later would have created a deadlock, because that would mean the cessation of all trade. So the proposed scheme is possible only in one case — when the exports of the country, conducting such a policy is in high demand in other countries. But in the long term, such a policy would provide benefits for one country at the expense of others and, ultimately, would lead to their economic weakening, and hence to reduction of their import opportunities.
The fourth argument in defense of protectionism associated with the attempt to mitigate the crisis in industries, which encounter economic difficulties. Significant changes of supply and demand both on internal, and on external markets can cause a huge damage in some sectors. Such an attack has experienced, for example, cotton industries of England in the 1970s. Limitation of import in this period has helped to mitigate the crisis, giving the industry more time to rebuild and lead painless production cuts.
Today, the main trends in investment policies are: liberalization and promotion of investments. They remain the dominant element of the recent investment policy. However, with the rise in recent years restrictive investment measures and administrative procedures have increased the risk of investment protectionism.
As countries are increasingly leading active industrial policy, tightening procedures for the selection and monitoring, study of international mergers and acquisitions and further limiting the share of foreign direct investment (hereinafter – FDI) in strategic sectors, increases the risk that some of these measures may be protectionist in nature (see Illustration 1). With the appearance and rapid expansion of global and regional value chains protectionist policy can affect all actosubjects, both national and foreign.
Many species of new investment policy oriented a certain production. In 2012, at least 53 countries and economies around the world have adopted 86 policies affecting foreign investment. Most of these measures (75%) related to the liberalization and investment promotion and facilitation of investment procedures and focused on a variety of industries, especially in the services sector. An important component of these measures was the policy of privatization. Among other policies notes the establishment of special economic zones .
At the same time it was noted the increase of 25% shares of regulations and restrictions on FDI, which confirmed the long-term trend after a temporary change in the situation in 2011 (see Illustration 1). The States became more active in the use of industrial policy, adjusted previous efforts to liberalize investment, tightened the procedures for the selection and monitoring and began to check cross-border mergers and acquisitions more carefully. The policy of restricting the investments were used primarily to such strategic industries as mining. In most countries, the state has become more selective in choosing the specific weight of FDI in various sectors of their economy.
Illustration 1 – Changes in the national investment policy, 2000-2012years, %
In general, direct foreign investments have a positive effect on the economic development of the host state, helping to increase the efficiency of the constituent factors of the economic development on the basis of economic restructuring, infrastructure development, promotion of employment of local labour, technology transfer, management experience, and the right to use a trademark of the parent company and others. The state, the host of FDI, there is no obvious reason to limit the long-term capital inflows in the form of investments. But any state regulates the inflow of foreign investment on the basis of various measures, having influence on the volume of attracted investments, including as it was described above, on their sectoral distribution.
During policy formulation of regulation of investment flows, the state takes into account their possible impact. According to foreign analysts, it is important to highlight three moments .
- The investment of foreign capital in the production takes place once, but the export of profit — constantly. This leads to the equalization of the volume of previously imported capital (in the form of investments) and exported capital (in the form of profit and income).
So, the «ageing» of the investment occurs. However, the investor does not always remove the whole amount of profit. To encourage the reinvestment of profit in the host country, it is needed a stable and favorable investment climate.
- Capital (foreign or national) is invested in the industry that provides the fastest and most effective return, which may lead to disproportionate development of the national economy, if the state will not regulate the direction of capital flows. This also applies to the polluting industries, portable from industrialized countries to developing countries, where relatively mild standards of environmental protection take place, which will certainly affect the environmental component of the region/country in the future.
- The psychological moment, namely, the negative attitude of the private sector, and individual citizens of the host country to the ownership of foreign capital, profitable industries, companies, and the influence they have on the determination of strategy of development of this or that branch of economy and others.
Note that any state as an Institute of power plays an active role in the development and implementation of a policy of attracting foreign investments in order to assistance the economic growth of the country; ensure economic sovereignty and/or obtaining the maximum possible economic advantages.
Government policies of the host country concerning foreign capital includes:
1) the policy of regulation of investments with the purpose of reception of the maximum profit per unit of invested capital;
2) the policy of stimulating to attract the maximum amount of capital. Here’s more important to ensure potentially the greatest inflow of investments, not their efficiency.
The increase in the inflow of foreign capital occurs, as a rule, in conditions of growth of domestic investment, which characterizes the principle according to foreign and domestic investment. Creation of a favorable investment climate for domestic enterprises is a priority of the state investment policy, with its indirect result of the growth of foreign investment.
State policy of regulation of foreign investments is carried out in respect of foreign property, in the tax and customs spheres, currency and price fields and others. In practice, it is implemented through various measures (trade restrictive measures in respect of foreign investment, restrictive and stimulus measures taken by the home countries of transnational corporations and others).
In General, the national policy of the host state influences, to a greater extent, the sectoral expenditure areas, and to a lesser extent, the amount of attracted capital. The availability of effective legal conditions for the admission and operation of foreign investments — a preliminary evaluation criterion of the investment climate in the host country.
A more significant role plays the following macroeconomic factors:
1) the capacity of the market of the host country, defined by the Gross National Product and per capita income. The attractiveness of the country as a base for subsequent export of goods to the foreign market is growing, which is associated with lowering trade barriers and transport costs. However, the practice of a small capacity of the domestic market economies (for example, Hong Kong or Singapore) confirms that the economy should not be a barrier to foreign investment;
2) level of political risk in the country. Political risk of the country depends on the level of political stability and democratic nature of the political system of the country;
3) the dynamics of the exchange rate of the national monetary unit: during a rise in the exchange rate the inflow of foreign investments is stimulated, the export profits on foreign investments increases; in case of the fall, on the contrary, is decreasing because for foreign investors it is unprofitable to export of profits, interest, dividends.
Policy in the field of FDI is increasingly interconnected with the industrial policy at the national and international levels. The goal is to manage this relationship, which will put the two policies for the service of development. The key significance is finding the so-called «Golden mean» between the strengthening of the domestic productive capacities, on the one hand, and preventing investment and trade protectionism on the other, as well as strengthening international coordination and cooperation.
Thus, paradisco proceeds from long-term interests and substantiates the global gains from free trade, while protectionism acts under the pressure of circumstances and guided solely short-term national interests. Russia until recent times pursues a policy of protectionism. With the expansion of economy and WTO accession, the situation changed. At the G20 summit President of Russia Vladimir Putin has appealed to «honestly agree about protectionism» . Currently Russia pursues a policy of free trade, because of Russia`s entering the international market, removed borders and trade restrictions, however, on some sectors and market segments, for example, the automobile market, the tendency is opposite — protection of the domestic producer. That is connected with the establishment of quotas and increasing customs duties on imported cars. This policy is reflected in the fact that many companies have become more profitable to produce their goods directly on the territory of the state, that, certainly, gives a positive and beneficial consequences both for producers and for the country in which it is carried out, as well as for consumers. Namely, this creates a favorable investment climate in the country, creates new jobs due to the opening of new factories, and reduces the cost of production due to lower delivery costs and its separate parts.
Therefore, we cannot say that for a country protectionism is always harmful, but free trade is always best, or vice versa. V.Pareto affirms: «Knowing all economic and social conditions of the country at the moment, you should understand what for this country and at this moment is more suitable — free trade or protectionism» .
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