... is called tariff-jumping when firms want to minimize trade costs by investing money into a market with very high tariffs or limited access in order to compete with domestic producers. This is clearly a substitute of trade. Horizontal disintegration is a similar type of FDI as firms try to diffuse their production units to access markets in other countries, so that they are able to avoid impediments like tariffs, quotas or even currency difference. The famous fast food chain, McDonald's, is initially an American company and it has now invested internationally. However, some types of FDI are the opposite, complements to trade. Some countries possess comparative or absolute advantages like higher level of technology or cheaper factors of production in general. For instance, cheaper labour is found in China while the US is better at advanced technology. If a firm wants to produce clothes, it might find China to be ...

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