Foreign Direct Investment (FDI) is a key element in achieving progress. In a world with increasing competition for capital, it is mandatory for countries to develop different mechanisms to attract FDI. Mexico is an example of a developing country that in recent years has greatly benefited from FDI. This trend results from this country's development of a number of mechanisms on both the domestic and the international scene promoting this type of investment. Along with the investment openings being fostered on the domestic scene, Mexico has been conducting international efforts to reach FDI objectives. It has entered into a number of Bilateral Investment Treaties (BITs) as well as Bilateral and Regional Free Trade Agreements (FTAs). The most important goals achieved by this country encouraging the reception of FDI are the preferential trade agreements signed with the two biggest markets in the world, North America and the European Union. Mexico's participation in the WTO represents one of its efforts to establish lateral ties to achieve its FDI objectives. The fact that there is a relationship between trade and investment has been established.

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This thesis examines the applicability of the theoretical framework of strategic trade to the export-led growth of the automobile industry in South Korea. The study focuses on four areas. First, the "new" theory of international trade is elaborated in order to identify the “prerequisite” industrial characteristics under which policies of strategic trade are theoretically advantageous. Secondly, the development of the automobile industry in South Korea is analyzed. The focus is on examining the role of the state in initiating industrial and trade policies that specifically targeted the automobile sector. This thesis argues that strategic trade is a valid analytical framework in the case of the South Korean automobile industry. Thirdly, the development of the automobile industry in South Korea is compared with that of Mexico. The comparative perspective helps highlight several factors that may have helped make policies of strategic trade effective in the South Korean case. These factors include a virtual absence of transnational corporations and domestic industrial conglomeration in the South Korean automobile industry. Finally, based on the possible critical importance of these factors for policy implementation and outcomes, the thesis ends with a discussion on the relevance of strategic trade as a model for economic development. / Master of Arts