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The_Impact_Of_Mnes

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					Title:
The Impact Of Mnes

Word Count:
593

Summary:
The United States is the home -country for the largest amounts of foreign
licensing and direct investment. Therefore, its policies understandably
arouse some of the major trade unions of such outward moments. One of
these critics is organized labor, which argues that foreign production
often displaces what would otherwise be US production. For example, big
corporations have been criticized because they decided to shift some or
all of their production to less costly countries,...


Keywords:
Investment, skilled labor, employment, jobs


Article Body:
The United States is the home -country for the largest amounts of foreign
licensing and direct investment. Therefore, its policies understandably
arouse some of the major trade unions of such outward moments. One of
these critics is organized labor, which argues that foreign production
often displaces what would otherwise be US production. For example, big
corporations have been criticized because they decided to shift some or
all of their production to less costly countries, such as Mexico, because
of the NAFTA agreement. Trade unions also cite many examples of highly
advanced technology that has been at least partially developed through
governmental contracts and then transferred abroad. An example is
Boeing's transfer of aerospace technology to China to produce aircraft
parts. According to trade unions, if Boeing did not transfer the
technology, China would purchase the products in United States, thus
increasing U.S. employment and output.

Closely related to the question of job loss is the question of whether
the outsourcing of production puts downward pressure on wages in the home
country. On the other hand, there is anecdotal evidence that it does. For
example, computer programmers in the United Kingdom, make three to six
times, the monthly salary of programmers in India. So the possibility of
moving more work to India has caused a recent drag on the real wages of
U.K. programmers. On the other hand, there is evidence that moves by
companies to lower-wage countries increase the overall home-country
demand and wages for skilled labor. This is because the cost savings from
producing abroad increase demand for the products produced abroad, such
as Nike shoes, thus increasing the need for Nike to hire more managerial
personnel in the United States.

Moreover, due to the size of many multinational enterprises (MNEs), there
is much concern by trade unions that they will undermine through
political means the sovereignty of nation-states. The foremost concern is
that an MNE will be used as a foreign-policy instrument of its home-
country government. The fact that companies depend primarily on their
home countries is illustrated by the realization that from the 100
largest companies in the Fortune 500 list, only 18 have a majority of
their assets outside their home-country and very few have a foreigner on
their executive board. These companies are most internationalized in
terms of their sales; however, fewer than half generate more than half of
their sales outside their home markets. Because the home-countries of
most MNEs are industrial ones, it is understandable that this concern is
taken most seriously in less-developed countries (LDCs). But it is not
restricted to them.

Two other sovereignty issues are raised less frequently. One is that the
MNE may become independent of both the home and host countries, making it
difficult for either country to take actions considered being in its best
interests. The second is that the MNE might become so dependent on
foreign operations that the host country can use it as a foreign-policy
instrument against its home country or another country. Under this sphere
of influence, trade unions exercise trade control, by enforcing trade
restrictions, antitrust laws, and key sector control measures or even by
forming state-owned enterprises. For example, much have been said about
the US government's attempt to apply its trading with the Enemy Act to
foreign subsidiaries of US companies, in order to keep them from selling
to certain unfriendly countries. Such measures, that restrict free trade
and enhance the threat of reducing gains, drive MNEs either to accept the
new roles of the global game or in most cases to oppose it.

				
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