Why has FDI grown more rapidly than world trade?
A) Decline in trade barriers has made the fear of protectionist pressures redundant.
B) Executives of business firms see FDI as a way of circumventing future trade barriers.
C) There has been a general shift toward radical and totalitarian political institutions.
D) Privatization has made developing nations less attractive for multinational enterprises.
E) There has been a general shift toward centrally planned command economies.

Question

Quizplus · Accepted Answer

FDI has grown more rapidly than world trade because executives of business firms see FDI as a way of circumventing future trade barriers. As trade barriers become more frequent and strict, companies are looking for ways to bypass them and FDI often allows them to access the market and operate locally without facing these barriers. This has resulted in a higher growth rate for FDI compared to world trade.

Why Has FDI Grown More Rapidly Than World Trade