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This paper seeks to determine the impact of foreign direct investment (FDI) on manufacturing sector in Barbados, over the decade 1985 to 1995. Analysis of this impact is carried out within Bhagati's hypothesis that the impact of FDI is conditional on the type of trade strategy pursued by the host country. Section A presents a brief generalized history of FDI, while section B examines Bhagwati's hypothesis in more detail. Section C looks at modern history of FDI in various sectors of the Barbadian economy and compares the period 1977-1984 with the period 1990 to 1994. The final section presents a micro-economic analysis of the impact of FDI on the manufacturing sector using probit model as the tool of analysis.