MULTINATIONAL FIRMS – efficiency advantages of the stakeholders Lindia-Maria Moritz 0202263

MULTINATIONAL FIRMS – MULTINATIONAL FIRMS – efficiency advantages of the efficiency advantages of the stakeholdersstakeholders

Lindia-Maria MoritzLindia-Maria Moritz

02022630202263

What are MNEs (Multinational Enterprises)/TNCs What are MNEs (Multinational Enterprises)/TNCs (Transnational Corporations)?(Transnational Corporations)?

Enterprises that engage in foreign direct investment Enterprises that engage in foreign direct investment (FDI) and owns or controls value-adding (service, (FDI) and owns or controls value-adding (service, production) activities in more than one countryproduction) activities in more than one country

Capital flows between nationsCapital flows between nations

Rent seekingRent seeking

Development of the relationship between Development of the relationship between nation-states and foreign TNCsnation-states and foreign TNCs

Over the last few decades periods of co-existence Over the last few decades periods of co-existence were followed by waves of nationalisationwere followed by waves of nationalisation

National governments face a continuing loss of National governments face a continuing loss of bargaining and decision-making power vis-a-vis TNCsbargaining and decision-making power vis-a-vis TNCs


1960s: FDI was widely welcomed. Towards the end of 1960s: FDI was widely welcomed. Towards the end of that decade governments began to exhibit concern with that decade governments began to exhibit concern with regard to the impact of foreign investment on the regard to the impact of foreign investment on the national economy.national economy.

1970s: Nations have been whittling away at the 1970s: Nations have been whittling away at the concept that foreign-owned businesses are concept that foreign-owned businesses are presumptively entitled to non-discriminatory treatmentpresumptively entitled to non-discriminatory treatment

1980s: liberalism became the dominant discourse1980s: liberalism became the dominant discourse 1980s and 1990s: openness to FDI1980s and 1990s: openness to FDI


TNCs began to play a more direct role in the setting of TNCs began to play a more direct role in the setting of international rules and disciplinesinternational rules and disciplines

Conflict of interests: The principal challenge is of Conflict of interests: The principal challenge is of ensuring that the differences in their goals and ensuring that the differences in their goals and perspectives do not create such clashes between them perspectives do not create such clashes between them as to undermine the essential role of eachas to undermine the essential role of each

The Power of the Multinational EnterpriseThe Power of the Multinational Enterprise

Multinationals moveMultinationals move country to country in order to country to country in order to compete more successfully on labor and other costcompete more successfully on labor and other cost

The more the working conditions vary internationally, The more the working conditions vary internationally, the more the companies are tempted to exploit these the more the companies are tempted to exploit these differences -> may lead to a world-wide lowering in differences -> may lead to a world-wide lowering in wages and working conditionswages and working conditions


Due to theis size TNCs are major investors and job Due to theis size TNCs are major investors and job creatorscreators

Possession of key technologiesPossession of key technologies High growth-potentialHigh growth-potential Of the 100 biggest economies in the wolrd half are Of the 100 biggest economies in the wolrd half are

multinational enterprises and not more than half are multinational enterprises and not more than half are countriescountries

Enjoys political favors like tax exemption, state-Enjoys political favors like tax exemption, state-suppression of workers or the assignment of export suppression of workers or the assignment of export privilegesprivileges


TNCs increasingly penetrate every field of national TNCs increasingly penetrate every field of national government policy:government policy:

Regional and employment policyRegional and employment policy Social policySocial policy Education policyEducation policy Integration policyIntegration policy Technology policyTechnology policy Structural policyStructural policy Competition policyCompetition policy Monetary policyMonetary policy

Has globalization gone too far?Has globalization gone too far?

Globalization os exposing a deep fault line between Globalization os exposing a deep fault line between groups who have skills and mobility to flourish in global groups who have skills and mobility to flourish in global markets and those who either do not have these markets and those who either do not have these advantagesadvantages

The result is severe tension between the market and The result is severe tension between the market and social groups with governments stuck in the middlesocial groups with governments stuck in the middle

Focus on three sources of tension between the global Focus on three sources of tension between the global market and social stabiliy:market and social stabiliy:

Three sources of tension between the global Three sources of tension between the global market and social stabiliymarket and social stabiliy

1.1. Reduced barriers to trade and investment accentuate Reduced barriers to trade and investment accentuate the asymmetry between groups that can cross the asymmetry between groups that can cross international borders and those that cannot. Services international borders and those that cannot. Services of large segments of the working population can be of large segments of the working population can be more easily substituted by services of other people more easily substituted by services of other people across national boundariesacross national boundaries

2.2. Nations with very different sets of values , norms, Nations with very different sets of values , norms, institutions and collective preferences begin to institutions and collective preferences begin to compete head on in markets for similar goodscompete head on in markets for similar goods

3.3. Globalization has made it exceedingly difficult for Globalization has made it exceedingly difficult for governments to provide social insurancegovernments to provide social insurance

Social disintegration as the Price of Social disintegration as the Price of Economic Integration?Economic Integration?

The challenge is to enable countries that are willing to The challenge is to enable countries that are willing to engage in greater harmonization of domestic policies to engage in greater harmonization of domestic policies to do so, while also allowing them to selectively delink do so, while also allowing them to selectively delink from international obligations when these obligations from international obligations when these obligations come into conflict with domestic norms or institutionscome into conflict with domestic norms or institutions

The Role of National GovernmentsThe Role of National Governments

Strike a balance between Openness and Domestic Strike a balance between Openness and Domestic NeedsNeeds

Do Not Neglect Social InsuranceDo Not Neglect Social Insurance

The Role of International InstitutionsThe Role of International Institutions

Important International Institutions in the globalization Important International Institutions in the globalization process:process:

United Nations (UN)United Nations (UN) World Trade Organization (WTO)World Trade Organization (WTO) Organization for Economic Corporation and Development Organization for Economic Corporation and Development

(OECD)(OECD) Non-Governmental Organizations (NGOs)Non-Governmental Organizations (NGOs)

How to use the Power of the MNE to promote How to use the Power of the MNE to promote Human Rights: The case for the Model Business Human Rights: The case for the Model Business PrinciplesPrinciples

In summer 1995, the U.S. administration passed the In summer 1995, the U.S. administration passed the so-called Model Business Principlesso-called Model Business Principles

Provision of a safe and healthy workplaceProvision of a safe and healthy workplace Fair employment practicesFair employment practices Responible environmental protection and environmental Responible environmental protection and environmental

practicespractices Compliance with U.S. and local laws promoting good business Compliance with U.S. and local laws promoting good business

practicespractices Maintenance of a corporate culture that respects free Maintenance of a corporate culture that respects free

expression consistent with legitimate business concernsexpression consistent with legitimate business concerns

How to use the Power of the MNE to promote How to use the Power of the MNE to promote Human Rights: The case for the Model Business Human Rights: The case for the Model Business PrinciplesPrinciples

Goal is to build a world where Goal is to build a world where “global norms of worker “global norms of worker rights and environmental protection rise, so that profits rights and environmental protection rise, so that profits increasingly result from inspiration and perspiration, not increasingly result from inspiration and perspiration, not exploitationexploitation

The philosophical Agenda: How to Justify Human The philosophical Agenda: How to Justify Human RightsRights

The Economic Agenda: Why is it Reasonable to The Economic Agenda: Why is it Reasonable to Promote Social and Environmental Standards Promote Social and Environmental Standards

The philosophical Agenda: How to Justify The philosophical Agenda: How to Justify Human RightsHuman Rights

The fundamental philosophical question which is The fundamental philosophical question which is relevant is that of the possibility of justifying relevant is that of the possibility of justifying universalistic positions in principleuniversalistic positions in principle

The universal character of Human Rights implicates The universal character of Human Rights implicates that they are to be respected by all humansthat they are to be respected by all humans

Two reservations:Two reservations: These norms are characterized by an eurocentrism and These norms are characterized by an eurocentrism and

therefore cannot be generalizedtherefore cannot be generalized The idea of human rights itself requires the recognition of The idea of human rights itself requires the recognition of

differing opinions, which means also the acceptance of differing opinions, which means also the acceptance of disapproving attitude towards themdisapproving attitude towards them

The Economic Agenda: Why is it Reasonable The Economic Agenda: Why is it Reasonable to Promote Social and Environmental to Promote Social and Environmental StandardsStandards

NGOsNGOs

Many enterprises in the clothing and sports articel Many enterprises in the clothing and sports articel branches had to pass guidelines on ethical behavior in branches had to pass guidelines on ethical behavior in international businessinternational business

Companies become more and more aware that they Companies become more and more aware that they can only survive in a healthy surroundingcan only survive in a healthy surrounding

The The MAIMAI – Mulitlateral Agreement on Investment – Mulitlateral Agreement on Investment


In 1995 startet negotiations for the Multilateral In 1995 startet negotiations for the Multilateral Agreement on Investment. The MAI is a proposed Agreement on Investment. The MAI is a proposed multilateral international agreement that is currently multilateral international agreement that is currently under negotiation at the OECD in Paris. If it is passed, under negotiation at the OECD in Paris. If it is passed, the MAI will have profound impact on the way that the MAI will have profound impact on the way that governments treat foreign investment in all of the 29 governments treat foreign investment in all of the 29 developed country-members of the OECDdeveloped country-members of the OECD


Elements:Elements: Open all sectorsOpen all sectors Treat foreign investors the Treat foreign investors the

same as local companiessame as local companies Set binding dispute Set binding dispute

settlement rulessettlement rules CoverageCoverage Definition of InvestmentDefinition of Investment SubsidiesSubsidies Performance Performance

RequirementsRequirements

National TreatmentNational Treatment Government ProcurementGovernment Procurement Investment IncentivesInvestment Incentives Reservations and Reservations and

WithdrawalWithdrawal Provincial JurisdictionProvincial Jurisdiction ExpropriationExpropriation


ConcernsConcerns: :

Closed secretive negotiationsClosed secretive negotiations Opens developing countriesOpens developing countries Preemption of local, state and national lawsPreemption of local, state and national laws All rights, no responsibilityAll rights, no responsibility Effects on sustainabilityEffects on sustainability It‘s all about capital mobilityIt‘s all about capital mobility


Ethyl:Ethyl:

Using an MAI-like provision of NAFTA, the U.S. based Using an MAI-like provision of NAFTA, the U.S. based Ethyl Corporation has sued the Canadian government Ethyl Corporation has sued the Canadian government for $251 million in damages related to a public health for $251 million in damages related to a public health and safety law.and safety law.


Immediately suspend negotiations, and undertake, Immediately suspend negotiations, and undertake, with meaningful public input and participation, an with meaningful public input and participation, an independent and comprehensive assessment of the independent and comprehensive assessment of the social, environmental, and development impact of the social, environmental, and development impact of the MAI.MAI.

Require, in any final investment agreement, that Require, in any final investment agreement, that multinational investors be made to observe binding multinational investors be made to observe binding agreements incorporating environment, labor, health, agreements incorporating environment, labor, health, safety and human rights standards to ensure that safety and human rights standards to ensure that they do not use the MAI to exploit weak regulatory they do not use the MAI to exploit weak regulatory regimes.regimes.


Eliminate the MAI's expropriation provision so that Eliminate the MAI's expropriation provision so that investors are not granted compensation for a vague, investors are not granted compensation for a vague, broad notion of regulatory takings. Governments broad notion of regulatory takings. Governments must ensure that they do not have to pay for the right must ensure that they do not have to pay for the right to set environmental, labor, health and safety to set environmental, labor, health and safety standards, even if compliance with such regulations standards, even if compliance with such regulations imposes significant financial obligations on investors.imposes significant financial obligations on investors.

Open the negotiation process to citizens, which will Open the negotiation process to citizens, which will require, among other things, timely public release of require, among other things, timely public release of draft texts and country positions and the scheduling draft texts and country positions and the scheduling of open public meetings and hearings in member and of open public meetings and hearings in member and nonmember countries.nonmember countries.

Thank you for your attention!Thank you for your attention!

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MULTINATIONAL FIRMS – efficiency advantages of the stakeholders Lindia-Maria Moritz 0202263