International Share Ownership, Profit Shifting and Protectionism

I examine the implications of increasing stock market globalisation for the economics of protection. European, Japanese and Australian data mostly indicate that over 30 per cent of the stock market is now foreign-owned, a large increase on the 1980s. Foreign share ownership in the USA is lower, but increasing fast. This degree of foreign share ownership is likely to change qualitatively the nature of governmental support for 'domestic' firms. A series of worked duopoly examples suggests that the level of foreign share ownership is usually sufficient for profit shifting on its own no longer to justify protection. (JEL: F 10, F 12)