Foreign direct investment (FDI) and trade play key roles in driving globalisation. Both are often thought to have a complementary relationship and work together to enable the movement of investment, goods and services globally.
Research from the OECD suggests that enhanced FDI levels can positively impact international trade. In broad terms, inward FDI is expected to lead to an increase in exports due to the transfer of technology and new products. Inward FDI can also strengthen trade links between countries as businesses ship goods back to their headquarter countries, or companies export machinery and equipment to their new overseas plants to improve operations or facilitate expansion.
Go deeper with GlobalData
To examine the connection between FDI and trade partners, Investment Monitor analysed the top five inbound FDI destinations worldwide between 2019 and 2021 in nominal terms and on a per capita basis.
The US was the world’s leading destination for inward greenfield FDI between 2019 and 2021, attracting more than 5,100 projects. In addition, US-based companies invested in approximately 11,000 projects overseas during this period, making the US the top country for outbound investment globally.
Germany was the second most popular inbound FDI country and the top location within Europe with 4,446 projects. It was followed by the UK, India – the leading Asia-Pacific FDI destination – and France.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataSingapore was the top FDI destination per capita between 2019 and 2021. During this period, the country attracted 189 projects per one million people. Ireland was the second most popular, followed by the United Arab Emirates (UAE), Luxembourg and Finland.
Are FDI partners also trade partners?
To determine if a country’s FDI and trade partners were more globalised or regionalised, we considered the top ten countries that each location imported from, exported to, attracted FDI projects from (inbound FDI) and established FDI projects in (outbound FDI) during the most recent three-year period available – 2019–21 for FDI projects and 2018–20 for trade. The countries that invested or traded with more countries outside of their source world region were deemed globalised and those that did so within their region were considered regionalised.
US takes globalised approach to trade and investment
The US operates in the world’s largest trade deficit. Between 2018 and 2020, the US imported $2.1trn more goods and services globally than it exported. In addition, US trade is largely focused on goods rather than services. The value of goods imported into the US was more than five times the number of imported services. The value of goods exported was more than double the value of exported services.
US trade and FDI partners are extremely globalised, and largely focused on Europe and Asia-Pacific. Its top FDI partners are mostly the same as its trade partners, although there is a change in rank. For instance, roughly 17% of US imports between 2018 and 2020 were from China, followed by its border countries Mexico (12.2%) and Canada (11.2%). These countries rank sixth, eighth and fourth, respectively, within the US’s top ten outbound FDI destinations.
The UK – which is the US’s top source country for inbound FDI and its top destination country for outbound investment – is also a key trade partner. The UK is the US’s third-largest export destination and sixth-largest country for imports. Other key FDI partners – Japan, Germany and India – are among the US’s top ten trade partners.
However, there are some outliers. For example, the US has strong FDI links with Australia, which doesn’t rank in the top ten for imports or exports. Australia is the US’s seventh most popular country for inbound and outbound FDI. Australian investment in the US is dominated by the healthcare sector, with Melbourne-based specialty biotechnology company CSL the most prolific investor. More than one-third of US FDI in Australia is in the software and IT services sector.
Germany favours Europe for trade and FDI
Aside from the major economic powerhouses of the US and China, German trade and investment is largely centred within Europe. Germany operates in a trade surplus, exporting $630.8bn (€599.27bn) more goods and services than it imported between 2018 and 2020.
The US was the country’s top export destination as well as the leading country for inbound and outbound FDI. China is Germany’s top country for imports and a key FDI player, ranking fourth for number of inbound and outbound FDI projects. France is Germany’s second most popular country for outbound FDI and exports. Other major FDI partners include Switzerland and the UK – both of which rank among the top ten import and export countries. The Netherlands – the second most popular import country – was among the top five locations for inbound FDI.
Apart from China and the US, Germany’s top ten countries for imports and exports are exclusively European. Germany’s FDI goes further afield, with Japan one of the top inbound locations, driven by investment in the electronics and industrial machinery sectors. India and Mexico also make the top ten outbound locations, due to an influx of German investment in the automotive sector.
UK trades close to home but remains split on FDI
The UK’s two main partners across each metric – imports, exports, inbound and outbound FDI – are the US and Germany. The UK operates in a trade deficit, importing $119.2bn (£97.27bn) more goods and services than it exported between 2018 and 2020.
France – which is the UK’s third most popular source country for FDI – is one of the country’s top five import and export partners. China – which accounted for 6.8% of UK imports during this period – is also one of the UK’s top outbound countries for investment and export destinations. Meanwhile, its closest neighbour Ireland ranks within the top five inbound FDI locations and export countries.
Most of the country’s top trade partners are European, with the US and China the only exceptions. When it comes to FDI, the UK’s partners are more global with half of the countries within the top ten inbound and outbound rankings located outside of Europe. For instance, Australia, the United Arab Emirates and India are key outbound FDI partners for the UK. Each offer investors access to a vast regional market as well as a large English-speaking talent pool.
India focuses on Asia-Pacific for trade but invests further afield
The US is India’s main FDI and trade partner. Between 2019 and 2021, the US accounted for 38.4% of Indian inbound FDI and 16.5% of outbound FDI. About 10% of Indian exports between 2018 and 2020 were to the US market. Other key FDI partners – Germany and the UK – were also major export destinations.
China – India’s main source market for imports – was also within India’s top five inbound FDI countries. Aside from the US, India’s trade partners are largely from the Asia-Pacific region as well as some of the wealthier European markets. For example, Switzerland is one of India’s top ten import markets largely due to trade in precious stones, pearls and gold. Iraq and Saudi Arabia are also key import countries due to trade in mineral fuels and oils.
India’s FDI partners are more globalised, with locations across Europe, Asia-Pacific and the Middle East. The UAE is the country’s second most popular destination for outbound FDI and exports. The UAE experienced a surge in Indian FDI in 2021, driven by growth in the healthcare, construction and food sectors. This relationship is expected to get stronger, with the signing of the UAE-India Comprehensive Economic Partnership Agreement in February 2022. The agreement’s main goal is to improve trade links between both countries.
France centres on Europe for trade and investment
The US and Germany are France’s key FDI and trade partners. US-based investment accounted for approximately one-quarter of France’s inbound FDI between 2019 and 2021, and 11% of outbound FDI. Germany is the country’s key trading market – representing 12% of imports between 2018 and 2020 and 10% of exports.
France’s trade and FDI partners are both very regionalised. Aside from the large global economies of China and the US, France’s top ten import and export countries are all European. Although there is slightly more diversity when it comes to FDI, most of France’s investment partners are in Europe.
One exception is Canada, which is France’s seventh most popular inbound FDI country but doesn’t appear in either trade top ten. Of the 65 projects Canadian companies invested into in France between 2019 and 2021, French-speaking Quebec was the most popular source region.
US, China and UK among Singapore’s top FDI and trade partners
China is Singapore’s main trading partner and leading country for imports and exports. The country is also Singapore’s second most popular outbound FDI destination and among its top ten countries for inbound FDI.
The US and UK are Singapore’s key FDI partners. Approximately 30% of the FDI projects Singapore attracted between 2019 and 2021 were from US-based companies. The UK is the main destination country for Singaporean investors, accounting for 11.1% of FDI from Singapore-based companies during this period. Despite these strong FDI links, the UK is not one of Singapore’s top ten import or export countries.
Singapore’s export markets are extremely regionalised, with the top ten locations all within the Asia-Pacific region, apart from the US. Its imports countries are more globalised, with France, Germany, the UAE and Saudi Arabia making the top ten, but the majority are still Asian nations. Most of Singapore’s top FDI partners are also from the Asia-Pacific region, although there are some outliers. Switzerland is one of Singapore’s top investing countries, driven by projects in construction and software. Australia is also one of Singapore’s leading outbound countries for investment, with tourism a key sector.
Ireland boasts strong trade and FDI links with the US
Ireland has an extremely strong trade and FDI relationship with the US. Almost 50% of the FDI projects Ireland received between 2019 and 2021 were from US-based companies, with software and IT services the most popular sector for investment. The US is also the country’s main import and export destination. Irish imports from the US range from aircraft and machinery to pharmaceuticals, and key exports include organic chemicals, medical instruments and beverages.
The UK and Ireland also have robust trade and investment links. It is Ireland’s top outbound FDI destination and roughly one-quarter of Irish investment between 2019 and 2021 went to the UK. The UK is also Ireland’s second most popular country for inbound FDI, exports and imports. Germany is another key partner and Ireland’s third most popular destination for exports and outbound FDI.
UAE operates as a global trade and investment hub
The UAE’s trade and investment partners are both more globalised than regionalised. Inbound FDI is largely focused on North America, Europe and the Asia-Pacific region with no Middle Eastern locations making the top ten. More than one-fifth of the FDI projects the UAE received between 2019 and 2021 were from US-based investors. The US is also among the UAE’s top three import markets, top five outbound FDI destinations and top ten export countries.
China is the country’s top location for imports and features within the top ten for exports, inbound and outbound FDI. The UAE also has strong links with India, which was the second most popular location for imports, outbound FDI and exports. UAE-India investment surged in 2021 and this relationship is expected to become stronger in 2022 and beyond amid bilateral trade agreements.
Saudi Arabia is the UAE’s top outbound and export destination. Its key exports include electrical machinery, nuclear reactors and vehicles. UAE-based companies invested in almost 70 FDI projects between 2019 and 2021, with business and professional services the most popular sector. Egypt was also a key outbound FDI partner due to an increase in business and construction projects. Iraq made the top three for exports due to trade in electrical machinery and mineral oils.
Luxembourg and Finland stick to European market
Trade in Luxembourg is extremely regionalised. Of its top ten import partners, the US and Singapore are the only non-European locations. The US is also the only destination outside Europe for exports within the top ten.
Germany is the country’s top trading partner, accounting for 10% of imports between 2018 and 2020 and 10% of exports. Germany is also a key FDI player and is Luxembourg’s third-largest country for inbound and outbound FDI.
The majority of Luxembourg’s FDI is also focused on Europe although the US is the top source market for inward investment. The US is also Luxembourg's second most popular location for imports and a top ten export destination.
Spain is Luxembourg’s main outbound FDI destination. This can be attributed to a surge in projects from residential construction company Aedas Homes, a subsidiary of Luxembourg-based Hipoteca 43.
Most of Finland’s top trade and investment partners are also based in Europe. Its key trade partner is Germany, which represented 10% of the Finland’s imports, 9% of exports and 12% of outbound FDI during the periods analysed.
One-quarter of Finland’s inbound FDI came from Sweden between 2019 and 2021, with a focus on projects in the communications and media, and software and IT services sectors. Sweden is also Finland’s second most popular import and export country. The US was the second most popular inbound FDI and outbound FDI location as well as ranking within the top five for imports and exports.
Between 2018 and 2020, Russia was Finland’s third-largest import market. More than 60% of its imports from Russia were mineral fuels and oils. Following Russia’s invasion of Ukraine in February 2022, Finland’s state-controlled oil company Neste announced plans to replace imports of Russian crude oil with crude oil from elsewhere, such as the North Sea.
Most top FDI players share same trade and investment partners
Research from Investment Monitor shows that the world’s top FDI locations share similar FDI and trade partners. Each location analysed had at least one key FDI partner within its top three that also featured in its top three trading countries. There were even more similarities when the top ten tables were compared across each metric. In addition, research showed that most of the countries analysed preferred to trade and invest within their source world region, with the US and UAE the only two that favoured the global market.
Glenn Barklie, chief economist at Investment Monitor, explains that this tendency for regionalisation over globalisation shows no sign of stopping: “The lingering supply chain and geopolitical issues point to a potential further regionalisation of trade and investment in the future.”
