Multinational Corporations
Question 1:
As Multinational Corporations (MNCs) have become a growing force in world trade they have attracted supporters and critics. Briefly discuss the arguments put forward by both sides. Explain how the WTO Organisation assists in managing world trade.
Advantages and disadvantages of MNC’s:
Advantages:
• MNC’s impact on host country: • Capital Formation (money which comes into the country) • Technology transfer • Regional and sectoral development • Internal Competition and Entrepreneurship • Favorable Effect on Balance of Payment • Increased Employment • Offering a wider product range
Disadvantages:
MNC’s impact on host country: • Industrial dominance (keep buying the other companies) • Exploitation of raw materials and cheap labour • Bribery and corruption • Interference in political matters • Technological dependence • Disturbance of economic plans of the country • Cultural change, change of lifestyle • Interference by home government through MNC • Degree of government control may be less than intended
The home country perspective: • Improves Gross Domestic Product via repatriation of profits, royalties and fees • Increases export opportunities • Political advantages • Job losses • Net effect on imports & exports • Creating competitors
WTO:
Main goals: • To promote trade flows by encouraging nations to adopt non-discriminatory predictable trade policies. • To reduce remaining trade barriers through multilateral negotiations • To establish impartial procedures for resolving trade disputes between members. • To encourage Free trade • Promoting fair competition • Encouraging development and economic reform • Trade without discrimination • Predictability through binding and transparency
Different Agreements: • General Agreement on Trade in Services (GATT) • Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) • Trade Related Investment Measures (TRIMS)
As Multinational Corporations (MNCs) have become a growing force in world trade they have attracted supporters and critics. Briefly discuss the arguments put forward by both sides. Explain how the WTO Organisation assists in managing world trade.
Advantages and disadvantages of MNC’s:
Advantages:
• MNC’s impact on host country: • Capital Formation (money which comes into the country) • Technology transfer • Regional and sectoral development • Internal Competition and Entrepreneurship • Favorable Effect on Balance of Payment • Increased Employment • Offering a wider product range
Disadvantages:
MNC’s impact on host country: • Industrial dominance (keep buying the other companies) • Exploitation of raw materials and cheap labour • Bribery and corruption • Interference in political matters • Technological dependence • Disturbance of economic plans of the country • Cultural change, change of lifestyle • Interference by home government through MNC • Degree of government control may be less than intended
The home country perspective: • Improves Gross Domestic Product via repatriation of profits, royalties and fees • Increases export opportunities • Political advantages • Job losses • Net effect on imports & exports • Creating competitors
WTO:
Main goals: • To promote trade flows by encouraging nations to adopt non-discriminatory predictable trade policies. • To reduce remaining trade barriers through multilateral negotiations • To establish impartial procedures for resolving trade disputes between members. • To encourage Free trade • Promoting fair competition • Encouraging development and economic reform • Trade without discrimination • Predictability through binding and transparency
Different Agreements: • General Agreement on Trade in Services (GATT) • Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) • Trade Related Investment Measures (TRIMS)