Trade and foreign investment in East and Southeast Asia.

This article provides a preliminary analysis of some recent data on trade and foreign direct investment (FDI) in East and Southeast Asia (ESEA). It also attempts a brief review and synthesis of some recent theoretical research on trade, FDI and growth in the ESEA context. The article suggests both theoretical underpinnings and preliminary empirical evidence in favour of the possible presence of a ''virtuous growth cycle'' whereby trade expansion, FDI and growth interact closely and sustain one another in ESEA. The article also draws attention to the unique dynamics of ESEA trade and FDI, where individual countries continuously upgrade their exports and constantly transform themselves from recipients of inward FDI to providers of outward FDI as they go through the growth cycle. Preliminary data in the article cast doubt on the hypothesis that ESEA manufactures' export may have had a substantial adverse impact on the labour market in their major industrial-country trade partners. Finally, the article suggests close links between FDI, trade and regional integration that may have served to enhance growth performance across ESEA countries.