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The multinational firm and international regulation

Published online by Cambridge University Press:  22 May 2009

Robert O. Keohane  and
Van Doom Ooms
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Extract

Writing about alternative international regimes to deal with direct foreign investment (DFI) may seem to be somewhat like discussing a perpetual motion machine: most people would like one for their own purposes; no one has ever built one; and discussions about their construction often take on a certain air of unreality. In contrast to the issue areas of money, trade, and aid, there is no important set of international institutions concentrating primarily on DFI. Numerous bilateral agreements and multilateral arrangements regulate or facilitate, in one way or another, the activities of private investors, but these have not been systematized into a coherent structure. Negotiations for new agreements do not take place within a large and semiformal international arrangement, such as the General Agreement on Tariffs and Trade (GATT), and no large international institution, such as the World Bank in the aid field, exists primarily to give direction to activities in this area.

Type
Section II
Information
International Organization , Volume 29 , Issue 1 , Winter 1975 , pp. 169 - 209
Copyright
Copyright © The IO Foundation 1975

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References

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41 The importance of status was brought clearly to our attention by Professor Joseph S. Nye.

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87 Nicholas deB. Katzenbach, “The Realistic Prospects for Greater Political Integration and Organization of Developed Countries Related to Investment,” ibid., p. 69.

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90 The report is listed as UN Document E/5500/Add.l (Part I), 24 May 1974. Part II consists of dissents and other comments by members of the group. The discussion of “institutional machinery and action” appears on pp. 34–41; the quoted phrase can be found on p. 40. The fact that the report appeared after this article had been completed and sent to the editors accounts for the relatively brief attention given to it here.

91 See the discussion of this question in United Nations, Department of Social and Economic Affairs, Multinational Corporations in World Development (UN Document ST/ECA/190), New York, 1973, p. 90Google Scholar.

92 This sentence was written before the publication of the report by the Group of Eminent Persons, but its conclusion seems to be supported by that report. The group did suggest that as a “longer term objective,” a “general agreement on multinational corporations” should be negotiated, but it argued that serious steps in this direction were premature at this time.

For a previous elaboration of the argument that vested interests of established international organizations would create pressures for coordination machinery rather than a powerful new operating agency to deal with multinational firms, see Walters, Robert W., “International Organizations and the Multinational Corporation: An Overview and Observations,” Annals of American Academy of Political and Social Science, no. 403 (09 1972): 127–38CrossRefGoogle Scholar.

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99 Stopford, John M. and Wells, Louis T. Jr, Managing the Multinational Enterprise (New York: Basic Books, 1972), chapter 11Google Scholar. One senior executive of a US manufacturing concern noted of Decision 24 of the Andean Pact: “I won't be surprised if it passes, but then I won't be surprised if it stretches like an accordian with all the clauses.” See “How Will Multinational Firms React to the Andean Pact's Decision 24?,” Inter-American Economic Affairs 25 (Autumn 1971): 57Google Scholar.

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101 John R. Pate, Jr., “Activities of Non-U.S. Companies and Governments in Peru,“ in ibid., part 4, p. 4.

102 “How Will Multinational Firms React to the Andean Pact's Decision 24?,” p. 62.

103 Stopford and Wells, pp. 152–53.

104 Ibid., chapter 8.

105 Ibid., p. 154.

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107 Reuber discusses two cases in which firms were forced into a minority ownership position at the insistence of the host country. “Agreements were finally signed allowing managerial fees, royalties for technology, and guaranteed dividends which, in combination, far exceeded anything that… the firms had repatriated from these projects up to that time or hoped to repatriate later;… they were no longer prepared to reinvest earnings on the basis of future growth potentials. Lack of control over the direction of growth and the distribution of potential profits changed the fundamental purpose of the companies' involvement.” Reuber, , pp. 86–87Google Scholar.

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110 For an interesting discussion of this possibility, see Gabriel, Peter H., “MNCs in the Third World: Is Conflict Unavoidable?,” Harvard Business Review 50 (07–08 1972): 93–102Google Scholar.

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