The Effect Of FTA On The Incentive Policy Of Host Countries

In the past few years,the economic globalization has gone through great changes.As a result,more and more capital choose to go abroad to explore international market and seek a broader space for development.Nowadays,FDI has set off a huge wave all over the world.Foreign direct investment,as one of the most active economic factors of economic development,has a far-reaching impact on both the home country and the host country.There are many reasons making China be faced with a desperate demand of foreign direct investment.For example.the excess foreign exchange assets.the excess capacity in some industries,the dependency on energies and mineral resources like oil and gas and the fact that our industrial structure needs to be upgraded and so on.Especially in 2014,China attached great importance on "the Belt and Road"strategv and made it a national strategy.This move has brought new opportunities and challenges to China’s foreign direct investment.And it is sure that there will be a lot of capital flocking out of our country to the international market.Athough,foreign direct investment can bring capital a broader market,it will also make capital be under more restrictionsof host country,such as the foreign policy,political environment,economic development and diplomatic relationship with the home country.In the past few years,the investment incentives of host country has been considered a relatively unimportant factor that can influence FDI.However,with the expansion and development of FDI,the impact of investment incentives on FDI also increases.It is the host country that can decide whether to carry out investment incentives or not,or to take implementation of what kinds of investment incentives and formulate the standards of companies that can enjoy these incentives.As to the capital,it can only passively accept the foreign policy of the host country,which is a relatively unfavorable factor for us.In addition,investment incentives for foreign capital may bring the host country some negative effects.Therefore,the host country is very careful of the formulation of foreign policy.In this article,we want to find out solutions to make the host country be willing to offer subsidies to our capital.Regional economic integration is an important trend of modern economic.As an important form of regional economic integration,Bilateral or multilateral FTA is being valued by more and more countries.In order to expand domestic market and develop national economy,countries are actively looking for partners by signing FTAs and other trade agreements with other countries.FTAs will help get rid of trade barriers between countries,so that goods,services can move freely.There have been a lot of Researches on the economic effects of FTA.The content of this paper is to study the effects of FTA on investment incentives of host country.This article studies the effects of FTA on the foreign policies of host country.This paper is divided into five parts.The first part introduces the background and significance of this article,the effects of regional economic integration on FDI,the impacts of FTA on FDI,the influences of foreign policy on FDI as well as the main innovation and shortcomings of this paper;The second part includes the theoretical knowledge of FTA.the present situations of the signing of FTA of China,related concepts of foreign investment incentives as well as the effects of foreign policies on the host country’s economy.The third part is the theoretical model of this paper.We first establish a theoretical model to analyze the influence of the host country’s tariff policy on the multinationals’ investment decisions.We conclude that the host country can obtain foreign direct investment just by adjusting tariffs.Then,we assume that the two countries sign the FTA which will eliminate the tariffs.In this case,we will find that the host country has to offer subsidies to attract FDI,which proves that FTA can make the host country to carry out investment incentives.The fourth part is the empirical model of the article.This paper selects to reflect a country’s level oincentivef foreign investment incentives preferential tax rates and infrastructure rates as the dependent variable,the number of countries signed the FTA as explanatory variables,national corruption index as a control variable,establish an empirical model to verify the theoretical model derived herein conclusions.The last part of the article is part of the conclusions and policy recommendations,presented opportunities and challenges "along the way" strategy for construction of FTA brings,and in our country "along the way"strategy to promote the construction of FTA put forward some suggestions.This article does not study the economic effects of FTA and foreign policies,but studies the influences of FTA on foreign policies of the host countries,which is the innovation of this paper.Main Deficiency of this article is the lack of relevant statas.