MULTINATIONAL FIRMS –
efficiency advantages of the
stakeholders
Lindia-Maria Moritz
0202263
What are MNEs (Multinational Enterprises)/TNCs
(Transnational Corporations)?
 Enterprises that engage in foreign direct investment
(FDI) and owns or controls value-adding (service,
production) activities in more than one country
 Capital flows between nations
 Rent seeking
Development of the relationship between
nation-states and foreign TNCs
 Over the last few decades periods of co-existence
were followed by waves of nationalisation
 National governments face a continuing loss of
bargaining and decision-making power vis-a-vis TNCs
Development of the relationship between
nation-states and foreign TNCs
 1960s: FDI was widely welcomed. Towards the end of
that decade governments began to exhibit concern with
regard to the impact of foreign investment on the
national economy.
 1970s: Nations have been whittling away at the
concept that foreign-owned businesses are
presumptively entitled to non-discriminatory treatment
 1980s: liberalism became the dominant discourse
 1980s and 1990s: openness to FDI
Development of the relationship between
nation-states and foreign TNCs
 TNCs began to play a more direct role in the setting of
international rules and disciplines
 Conflict of interests: The principal challenge is of
ensuring that the differences in their goals and
perspectives do not create such clashes between them
as to undermine the essential role of each
The Power of the Multinational Enterprise
 Multinationals move country to country in order to
compete more successfully on labor and other cost
 The more the working conditions vary internationally,
the more the companies are tempted to exploit these
differences -> may lead to a world-wide lowering in
wages and working conditions
The Power of the Multinational Enterprise
 Due to theis size TNCs are major investors and job
creators
 Possession of key technologies
 High growth-potential
 Of the 100 biggest economies in the wolrd half are
multinational enterprises and not more than half are
countries
 Enjoys political favors like tax exemption, statesuppression of workers or the assignment of export
privileges
The Power of the Multinational Enterprise
 TNCs increasingly penetrate every field of national
government policy:
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Regional and employment policy
Social policy
Education policy
Integration policy
Technology policy
Structural policy
Competition policy
Monetary policy
Has globalization gone too far?
 Globalization os exposing a deep fault line between
groups who have skills and mobility to flourish in global
markets and those who either do not have these
advantages
 The result is severe tension between the market and
social groups with governments stuck in the middle
 Focus on three sources of tension between the global
market and social stabiliy:
Three sources of tension between the global
market and social stabiliy
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2.
3.
Reduced barriers to trade and investment accentuate
the asymmetry between groups that can cross
international borders and those that cannot. Services
of large segments of the working population can be
more easily substituted by services of other people
across national boundaries
Nations with very different sets of values , norms,
institutions and collective preferences begin to
compete head on in markets for similar goods
Globalization has made it exceedingly difficult for
governments to provide social insurance
Social disintegration as the Price of
Economic Integration?
 The challenge is to enable countries that are willing to
engage in greater harmonization of domestic policies to
do so, while also allowing them to selectively delink
from international obligations when these obligations
come into conflict with domestic norms or institutions
The Role of National Governments
 Strike a balance between Openness and Domestic
Needs
 Do Not Neglect Social Insurance
The Role of International Institutions
 Important International Institutions in the globalization
process:
 United Nations (UN)
 World Trade Organization (WTO)
 Organization for Economic Corporation and Development
(OECD)
 Non-Governmental Organizations (NGOs)
How to use the Power of the MNE to promote
Human Rights: The case for the Model Business
Principles
 In summer 1995, the U.S. administration passed the
so-called Model Business Principles
 Provision of a safe and healthy workplace
 Fair employment practices
 Responible environmental protection and environmental
practices
 Compliance with U.S. and local laws promoting good business
practices
 Maintenance of a corporate culture that respects free
expression consistent with legitimate business concerns
How to use the Power of the MNE to promote
Human Rights: The case for the Model Business
Principles
 Goal is to build a world where “global norms of worker
rights and environmental protection rise, so that profits
increasingly result from inspiration and perspiration, not
exploitation
 The philosophical Agenda: How to Justify Human
Rights
 The Economic Agenda: Why is it Reasonable to
Promote Social and Environmental Standards
The philosophical Agenda: How to Justify
Human Rights
 The fundamental philosophical question which is
relevant is that of the possibility of justifying
universalistic positions in principle
 The universal character of Human Rights implicates
that they are to be respected by all humans
 Two reservations:
 These norms are characterized by an eurocentrism and
therefore cannot be generalized
 The idea of human rights itself requires the recognition of
differing opinions, which means also the acceptance of
disapproving attitude towards them
The Economic Agenda: Why is it Reasonable
to Promote Social and Environmental
Standards
 NGOs
 Many enterprises in the clothing and sports articel
branches had to pass guidelines on ethical behavior in
international business
 Companies become more and more aware that they
can only survive in a healthy surrounding
The MAI – Mulitlateral Agreement on Investment
The MAI – Mulitlateral Agreement on Investment
 In 1995 startet negotiations for the Multilateral
Agreement on Investment. The MAI is a proposed
multilateral international agreement that is currently
under negotiation at the OECD in Paris. If it is passed,
the MAI will have profound impact on the way that
governments treat foreign investment in all of the 29
developed country-members of the OECD
The MAI – Mulitlateral Agreement on Investment
 Elements:
 Open all sectors
 Treat foreign investors the
same as local companies
 Set binding dispute
settlement rules
 Coverage
 Definition of Investment
 Subsidies
 Performance
Requirements
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National Treatment
Government Procurement
Investment Incentives
Reservations and
Withdrawal
 Provincial Jurisdiction
 Expropriation
The MAI – Mulitlateral Agreement on Investment
 Concerns:
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Closed secretive negotiations
Opens developing countries
Preemption of local, state and national laws
All rights, no responsibility
Effects on sustainability
It‘s all about capital mobility
The MAI – Mulitlateral Agreement on Investment
 Ethyl:
Using an MAI-like provision of NAFTA, the U.S. based
Ethyl Corporation has sued the Canadian government
for $251 million in damages related to a public health
and safety law.
The MAI – Mulitlateral Agreement on Investment
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Immediately suspend negotiations, and undertake,
with meaningful public input and participation, an
independent and comprehensive assessment of the
social, environmental, and development impact of the
MAI.
Require, in any final investment agreement, that
multinational investors be made to observe binding
agreements incorporating environment, labor, health,
safety and human rights standards to ensure that
they do not use the MAI to exploit weak regulatory
regimes.
The MAI – Mulitlateral Agreement on Investment
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Eliminate the MAI's expropriation provision so that
investors are not granted compensation for a vague,
broad notion of regulatory takings. Governments
must ensure that they do not have to pay for the right
to set environmental, labor, health and safety
standards, even if compliance with such regulations
imposes significant financial obligations on investors.
Open the negotiation process to citizens, which will
require, among other things, timely public release of
draft texts and country positions and the scheduling
of open public meetings and hearings in member and
nonmember countries.
Thank you for your attention!