Relative Bargaining Powers of TNCs and States

Dicken talks about relative bargaining powers of TNCs and states that “such relationships revolve around their relative bargaining power: the extent to which each can implement their own preferred strategies” (Dickens 2011 pg. 225). In this he means that the TNCs have a great advantage to peruse a work environment that has a better cost to profit ratio, and the states can create taxes and guidelines that they have to follow. In short both sides can create good and bad scenarios for each other. In the article I have read how Mexico is a prime example of this relationship between TNCs and the State.

“The Mexican results, both the positive (renewed growth, capital inflows, increased and diversified exports, and reduced inflation) and the negative ones (foreign exchange crisis, trade and current account deficits, and weak capital formation), are outcomes directly related to the adoption of neo-liberal policies oriented towards reducing the role of thestate in the economy, Mortimer notes” (Raghavan, 1998).

In the article, Michael Moore, a senior economist at the Economic Commission for Latin America and the Caribbean (ECLAC), analyzed the performance of the automobile and economic sectors. The U.S. automobile TNCs investments have led to Mexican production facilities becoming globally competitive. However, instead of using national suppliers, the production has been reoriented into exports, which eventually affected Mexico’s auto-parts industry.

This shows that Dicken’s statement holds true that TNCs can produce both good and bad results in the host country’s economy.

Works Cited

Dicken, P. (2011) Global Shift. New York, London: The Guilford Press

Raghavan, C. (1998). Globalization’s Political Economy and the Role of the State. Retrieved from http://www.twnside.org.sg/title/role-cn.htm

 

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3 thoughts on “Relative Bargaining Powers of TNCs and States

  1. The Mexican scenario you used was very telling in regards to the TNCs effects on the local countries economy. I was wondering if the Mexican government eased regulations or encouraged the TNCs via other benefits.

  2. The TNC’s and States outlooks are quite different based on the company and the State policies and regulations respectively. The TNC’s mainly wanted to make the most profit out of their investment, use the local cheap and skilled labor, because they have taken the risk of investing in a State. The States on the other hand want to work normally for the welfare of the employees, manage the operations (sometimes not effectively) and making profits is not a big part of their policies. The trend is turning around now with TNC’s getting more involved in the local environment, contributing to the betterment of the population building schools , hospitals and other infrastructure. The State companies are also improving their standards of operations by getting more safety conscious, working efficiently and improving themselves using the TNC’s as yardsticks.

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