Foreign direct investment and trade in agro-food global value chains

Abstract

Foreign direct investment (FDI) and trade are driving forces in agro-food global value chains (GVCs), allowing companies to spread their activities across countries in complex production chains. This study explores the landscape of FDI in the agriculture and food sectors, using a novel database of mergers and acquisitions (M&As) covering the period 1997-2017. The study finds that FDI plays an important role in driving participation in agro-food GVCs, underscoring the close interdependencies between FDI, trade, and the various other channels that multinational enterprises (MNEs) use to engage with GVCs. The results from a survey of agro-food MNEs suggest that FDI decisions are underpinned by a diverse range of strategic motivations that go beyond commercial considerations and market-related factors. In particular, open, transparent and predictable trade and investment policies can have a strong positive influence on agro-food FDI. The study also highlights the importance of a broader set of policy areas, including dynamic agricultural innovation systems, policies to support supply chain linkages, and strong and effective laws governing responsible business conduct.