The Economic Views of a Nineteenth Century Ottoman Intellectual: The Relationship between International Trade and Foreign Direct Investment

Ahmed Midhat Efendi, a nineteenth century Turkish author, maintained that it was necessary to establish customs duties and other barriers against foreign sellers in order to convince them to produce locally in the Ottoman Empire. This would be a way to attract foreign direct investment (FDI) to a country in need of capital and technology. However, today, liberals around the world as well as in Turkey see a free trade environment as a prerequisite for FDI. This study tries to find out whether a relationship existed between free trade and FDI inflows in Turkey during a period when the Turkish foreign trade and financial markets were almost completely liberalized.