The Impact of MNEs

The United States is the home -country for theunions that they will undermine through political means
largest amounts of foreign licensing and directthe sovereignty of nation-states. The foremost
investment. Therefore, its policies understandablyconcern is that an MNE will be used as a
arouse some of the major trade unions of suchforeign-policy instrument of its home-country
outward moments. One of these critics is organizedgovernment. The fact that companies depend
labor, which argues that foreign production oftenprimarily on their home countries is illustrated by the
displaces what would otherwise be US production. Forrealization that from the 100 largest companies in the
example, big corporations have been criticizedFortune 500 list, only 18 have a majority of their
because they decided to shift some or all of theirassets outside their home-country and very few
production to less costly countries, such as Mexico,have a foreigner on their executive board. These
because of the NAFTA agreement. Trade unions alsocompanies are most internationalized in terms of their
cite many examples of highly advanced technologysales; however, fewer than half generate more than
that has been at least partially developed throughhalf of their sales outside their home markets.
governmental contracts and then transferred abroad.Because the home-countries of most MNEs are
An example is Boeing's transfer of aerospaceindustrial ones, it is understandable that this concern is
technology to China to produce aircraft parts.taken most seriously in less-developed countries
According to trade unions, if Boeing did not transfer(LDCs). But it is not restricted to them.
the technology, China would purchase the products inTwo other sovereignty issues are raised less
United States, thus increasing U.S. employment andfrequently. One is that the MNE may become
output.independent of both the home and host countries,
Closely related to the question of job loss is themaking it difficult for either country to take actions
question of whether the outsourcing of productionconsidered being in its best interests. The second is
puts downward pressure on wages in the homethat the MNE might become so dependent on foreign
country. On the other hand, there is anecdotaloperations that the host country can use it as a
evidence that it does. For example, computerforeign-policy instrument against its home country or
programmers in the United Kingdom, make three toanother country. Under this sphere of influence, trade
six times, the monthly salary of programmers in India.unions exercise trade control, by enforcing trade
So the possibility of moving more work to India hasrestrictions, antitrust laws, and key sector control
caused a recent drag on the real wages of U.K.measures or even by forming state-owned
programmers. On the other hand, there is evidenceenterprises. For example, much have been said about
that moves by companies to lower-wage countriesthe US government's attempt to apply its trading
increase the overall home-country demand andwith the Enemy Act to foreign subsidiaries of US
wages for skilled labor. This is because the costcompanies, in order to keep them from selling to
savings from producing abroad increase demand forcertain unfriendly countries. Such measures, that
the products produced abroad, such as Nike shoes,restrict free trade and enhance the threat of
thus increasing the need for Nike to hire morereducing gains, drive MNEs either to accept the new
managerial personnel in the United States.roles of the global game or in most cases to oppose
Moreover, due to the size of many multinationalit.
enterprises (MNEs), there is much concern by trade